ITEM 1. BUSINESS
GENERAL INFORMATION ABOUT OUR COMPANY
Cherubim Interests Inc. ("Company") was organized September 27, 2006 under the laws of the State of Nevada for the purpose of selling new food products produced or developed by North American companies to foreign markets. On August 31, 2009, the Company discontinued its involvement in the sales of tea due to a strategic change in business focus by the acquisition of mineral rights as disclosed in the Company's 8-K filed with the SEC on September 2, 2009. The Company currently has limited operations or realized revenues from its planned principle business purpose and, in accordance with ASC 915, "Development Stage Entities", formerly known as SFAS 7, "Accounting and Reporting by Development State Enterprises ." is considered a Development Stage Enterprise. The Company was incorporated in the State of Nevada, United States of America on September 27, 2006 and its fiscal year end is August 31. The Company was engaged in sales of new food products produced or developed by North American companies to foreign markets and discontinued that business in August 2009. The Company previously operated in the oil and gas industry, focused on the exploration for and development of oil and gas properties. Cherubim Interests now targets alternative, commercial, single and multifamily dwelling opportunities for the purpose of investment purchase. It also provides renovation services to third party multifamily dwelling unit owners on a turn-key basis. Cherubim Interests specializes in covering the entire spectrum of development - including due diligence, acquisition, planning, construction, renovation, and property management. This comprehensive expertise allows the company to provide complete beginning-to-end development programs for all acquisitions.
On 11/4/ 2013 the company received official communication that Marcus Mueller, was resigning as a Director of Cherubim Interests Inc. to pursue other interest. The Board of Directors then appointed Patrick Johnson to serve as a Director of Cherubim Interests Inc.
On 11/13/2013 the Board of Directors appointed Patrick Johnson (37), Chief Operating Officer (COO).
On 11/13/2013 Cherubim Interests Inc. signed an exploration agreement with Evergreen Petroleum of Dallas, TX. Evergreen has over 150 years’ experience in the oil and gas industry, and particular with expertise in the state of Wyoming will be the General Manager of the Exploration Project including selection of areas to lease, drilling exploratory wells, drilling development wells, and producing oil and gas found. Evergreen has conducted and will continue to conduct both regional and local geological studies to define prospects that are worthy of acquiring oil and gas leases. Preliminary examinations of title to the minerals in these selected areas and the acquisition of said leases will be carried out for and on behalf of the Parties by Pacer Energy LLC (“Pacer”) of Gillette, Wyoming. The Operator of the drilling venture will be L & J Operating Inc. of Gillette, Wyoming, with the responsibility of obtaining the required bonds, preparation of the Joint Operating Agreement A.A.P.L. Form 610 - 1989. This team will be responsible for the selection of all contractors and suppliers, payment of all invoices, sale of produced oil, payment of Ad Valorem, Conservation, and Severance Taxes and payment to the Parties of their net income on a monthly basis. We will engage engineering and geological consultants as required. All the activities of the Operator shall be under the supervision of the parties to this agreement including daily and other interval reports. Cherubim Interests Inc. will be responsible for the funding of this project, with the initial operating funds of twenty-five thousand dollars ($25,000) due in 30 days from the date of the agreement.
On 11/14/2013 the Board of Directors authorized the issuance of five million (5,000,000) shares of rule 144 restricted common stock at a price of .015 per share value paid by the company and issued to Patrick Johnson for accepting the COO position, service as a Director and his efforts to bring a new venture and funding to the company. This issuance represents ownership of 20% of the current authorized and outstanding shares (25,000,000) of Cherubim Interests Inc.
On 11/26/2013 the Board of Directors authorized the conversion of old debt into Cherubim Interests Inc. Free Trading Common Stock in the amount of thirty three thousand dollars ($33,000) to QuoteBrand at a conversion rate of $.03 cents per share for a total of one million one hundred thousand shares (1,100,000) of Cherubim Interests Inc. common stock. This conversion will reduce the QuoteBrand Note Payable, issued on February 15, 2011 for cash funds received by Cherubim Interests Inc.
On January 6, 2014 the Board of Directors of Cherubim Interests Inc. met to review the notification from its auditor, Sam Kan and Company, concerning his issues with the SEC and that he was giving up his PCAOB certification license to perform public audits. The board discussed the work that had been performed by KLJ and Associates, LLP on the last three reporting when Sam Kan and Company, transferred the quarterly reviews to KLJ and Associates, LLP. The Board of Directors approved the following action; On January 6, 2014, the Board of Directors dismissed Sam Kan and Company, its independent registered public accounting firm. On the same date, January 6, 2014, the accounting firm of KLJ and Associates, LLP was engaged as the new independent registered public account firm.
On June 4, 2014 the Board of Directors appointed Patrick Johnson, Chief Executive Officer (CEO).
On June 4, 2014 the Board of Directors appointed Terry Lynch, President and Chairman of the Board.
On June 10, 2014 the Company appointed James Kerr, Chief Financial Officer (CFO).
On July 11, 2014 the Board of Directors authorized the conversion of existing debt into Cherubim Interests Inc. Free Trading Common Stock in the amount of thirty three thousand dollars ($81,000) to QuoteBrand at a conversion rate of $.03 cents per share for a total of two million seven hundred thousand shares (2,700,000) of Cherubim Interests Inc. common stock. This conversion will reduce the QuoteBrand Note Payable, issued over the past several years for cash funds received by Cherubim Interests Inc. with a current balance due of ninety thousand seven hundred forty eight dollars ($90,700) as of August 31, 2014.
Pursuant to an Agreement and Plan of Reorganization dated April 27, 2015, the Company agreed to acquire all of the membership interests of Cherubim Interests, LLC, a limited liability company, from Victura Construction Group, Inc. (“Victura”). Victura is an affiliate of Patrick Johnson, a director and President of the Company, and is a non-reporting public company trading under the symbol VICT. The acquisition closed on April 27, 2015. Pursuant to the acquisition, the Company has (a) effected a 1-for-15 reverse stock split, such that the 83,626,881 outstanding shares of common stock will be reclassified as 5,575,125 shares of new common stock; (b) issued 60 million shares of new common stock to Victura in the exchange; (b) amended the Articles of Incorporation to change the name of the Company to “Cherubim Interests, Inc.,” and (c) accepted the resignation of director and officer Terry Lynch and the appointment of new directors to serve with Patrick Johnson.
As a result, there are approximately 65,575,125 outstanding shares of Common Stock, plus some number of additional shares (estimated not to exceed 1,000) to be issued for rounding of the reverse stock split.
On or about April 27, 2015, the Company assigned its interest in the Rocky Ford oil and gas lease to outgoing director Terry Lynch in settlement of its debt of $280,000 in compensation and severance benefits due to him.
The acquisition of Cherubim and the disposition of the Rocky Ford lease reflects the Company’s change of business direction from oil and gas (resulting from the recent decline in market prices) and its adoption of his new business strategy to construct retail and grow facilities for the medical cannabis industry.
Effective April 27, 2015 the following persons joined Patrick Johnson and officers and directors:
Gary Fewell, age 53 Chief Operating Officer and Director, has held the same position at Victura since March 2014. Mr. Fewell has benefited from the mentorship of highly recognized oil and gas professionals for over 15 years, during which time he coordinated a number of oil and gas projects from conception through completion. He specializes in identifying potential long-term growth opportunities and in developing upstream projects in oil and gas development. Mr. Fewell has more than 20 years of relevant experience in both management and work environments ranging from Fortune 500 companies to start-up businesses. He has extensive experience in financial analysis, procurement, budget management, and all phases of project development.
Charly Everett, age 55, Director, has held the same position at Victura Construction since March 2014. Charly is the architect of Cherubim Builders Group, the flagship subsidiary of Victura Construction Group, Inc. Since its organization, Cherubim Builders Group has been an industry leader in construction services, offering several distinctive divisions including Gregg Construction (1972), WaterMasters Restoration (1999), and Designer Lane (2011). Together, they offer specialists in mitigation and restoration, renovation, remodeling, new construction and construction materials supply. Charly brings a deep and broad understanding of operations and team building, having served for over 15 years in the roles of Store Operations, Training and Development and Human Resources for Racetrac Petroleum prior to joining forces with WaterMasters at its inception. Subsequently adding Gregg Construction in 2005 and creating Designer Lane in 2011, Cherubim Builders Group was formed in 2012 to offer industry expert capabilities in all construction and supply areas. Charly’s reputation for integrity and service is unparalleled in the industry.
Corbin Grubbs, age 38 Chief Financial Officer, has held the same position at Victura since February 2015. Grubbs, a graduate of Texas Tech University, is the former Director and Chief Financial Officer of a privately held nationally recognized debt purchaser. For over eight years he was an instrumental part of the executive management team that eventually sold the Company’s portfolio of assets to a larger publically held debt buyer. He currently serves as the Chief Financial Officer of Victura Construction Group and has over 20 years of accounting and financial business experience. Prior to this engagement, Corbin has held various management and leadership positions with both private and publically held organizations within the automotive, healthcare, financial services, and manufacturing industries.
On April 28, 2015, Terry Lynch resigned as an officer and director. He was provided the opportunity to provide a statement regarding his resignation to be filed with this 8-K and declined to do so.
On July 1, 2015, the Board of Directors of the Company approved a License Agreement with Victura Construction Group Inc. ("VICT") of proprietary technology relating to a fully portable and scalable, self-contained Controlled Environment Agriculture Cultivation Facility, which may or may not be accompanied with a Standard Operating Procedure (“SOP”) Manual, designed for the purposes of year round plant cultivation (“Technology”). The Controlled Environment Agriculture Cultivation Technology (“Cultivation Unit”) may be used for cultivation year round in most climates as long as water and electricity are available in such a capacity as further defined in the site specific SOP. The license is worldwide, non-revocable and perpetual except as otherwise set forth in the License Agreement. Under the License Agreement, VICT will be entitled to 5% of the gross revenues from any facility and have the exclusive right to construct each facility. VICT is under common control with the Company in that Mr. Patrick Johnson, CEO, is an officer and director of the Company and VICT.
On July 31, 2015, the Company issued a convertible promissory note to Auctus Fund LLC. in the amount of $45,750. The note is due on May 1, 2016 and bears interest at 10% per annum. The loan becomes convertible 300 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied by the lowest trading price during the previous twenty-five (25) day trading period ending on the latest complete trading day prior to the conversion date.
Compliance with Environmental Laws
We are not aware of any environmental laws violations or issues.
Employees
The CEO, CFO and COO are full-time employees of the company.
Reports to Securities Holders
We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements including filing Form 10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ('SEC'), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
ITEM 1A.
ITEM 1A. RISK FACTORS
THERE IS SUBSTANTIAL UNCERTAINTY AS TO WHETHER WE WILL CONTINUE OPERATIONS.
If we discontinue operations, you could lose your investment. Our auditors have discussed their uncertainty regarding our business operations in their audit report dated August 31, 2015. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such, we may have to cease operations and you could lose your entire investment.
WE LACK AN OPERATING HISTORY
There is no assurance that our future operations will result in continued profitable revenues. If we cannot generate sufficient revenues to operate profitably, our business will fail. We have very little operating history upon which an evaluation of our future success. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS AND THE FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker- dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the National Association of Securities Dealers believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The National Association of Securities Dealers' requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
ITEM 2.
ITEM 2. PROPERTIES
The company is currently operating at 1304 Norwood Dr. Bedford Texas where it rents office space for $500.00 per month.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings, and we are not aware of any pending or potential legal actions.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fiscal year ended August 31, 2015.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a)
Market Information
The common shares of Cherubim Interests Inc. are quoted on the OTC.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
We have not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Although there are no restrictions that limit the ability to pay dividends on our common shares, our intention is to retain future earnings for use in our operations and the expansion of our business.
High
Low
First Quarter
$
0.02
$
0.04
Second Quarter
$
0.02
$
0.02
Third Quarter
$
0.08
$
0.02
Fourth Quarter
$
0.01
$
0.07
High
Low
First Quarter
$
0.04
$
0.01
Second Quarter
$
0.02
$
0.02
Third Quarter
$
0.02
$
0.01
Fourth Quarter
$
0.12
$
0.04
Our shares of common stock commenced quotation on the OTC Bulletin Board under the symbol INCT on June 3, 2008 and currently trade under the symbol CHIT.
(b)
Holders of Common Stock: Currently we have approximately 36 shareholders of record, and 125,025,261 shares issued and outstanding with an approximate float of 18,851,720 shares as of August 31, 2015. Because of our small shareholder base, our stock may not experience high volume trading in the near future. We anticipate more shareholders in the future, but cannot guarantee any such happening.
(c)
Dividends: There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend
1.
we would not be able to pay our debts as they become due in the usual course of business; or
2.
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution. We have not declared any dividends, and we do not plan to declare any dividends in the foreseeable future.
(d)
Securities Authorized for Issuance under Equity Compensation Plans: There are no outstanding grants or rights or any equity compensation plan in place.
Recent Sales of Unregistered Securities
On 11/14/2013 the Board of Directors authorized the issuance of five million (5,000,000) shares of rule 144 restricted common stock at a price of .015 per share value paid by the company and issued to Patrick Johnson for accepting the COO position, service as a Director and his efforts to bring a new venture and funding to the company. This issuance represented ownership of 20% of the then authorized and outstanding shares (25,000,000) of Cherubim Interests Inc.
On 11/26/2013 the Board of Directors authorized the conversion of old debt into Cherubim Interests Inc. Free Trading Common Stock in the amount of thirty three thousand dollars ($33,000) to QuoteBrand at a conversion rate of $.03 cents per share for a total of one million one hundred thousand shares (1,100,000) of Cherubim Interests Inc. common stock. This conversion will reduce the QuoteBrand Note Payable, issued on February 15, 2011 for cash funds received by Cherubim Interests Inc.
On 7/11/14 the Board of Directors authorized the conversion of existing debt into Cherubim Interests Inc. Free Trading Common Stock in the amount of thirty three thousand dollars ($81,000) to QuoteBrand at a conversion rate of $.03 cents per share for a total of two million seven hundred thousand shares (2,700,000) of Cherubim Interests Inc. common stock. This conversion will reduce the QuoteBrand Note Payable, issued over the past several years for cash funds received by Cherubim Interests Inc. with a current balance due of ninety thousand seven hundred forty eight dollars ($90,700) as of August 31, 2014.
On October 21, 2014 1,000,000 Shares were issued to Cloud Solutions LLC for Information Technology services on a one year contract valued at $50,000 USD.
On October 29, 2014 3,000,000 Shares were issued to Corporate Ads LLC for services.
On February 11, 2015 4,000,000 shares were issued to an executive of the company for services.
On February 11, 2015 1,000,000 shares were issued for services.
On February 13, 2015 1,333,333 shares were issued on conversion of a convertible promissory note.
On June 19, 2015 the Company issued a convertible promissory note to Gold Coast Capital, LLC in the amount of $25,000.
The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 70% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the forty-five (45) trading day period ending on the latest complete trading day prior to the conversion date. This was a debt purchase of Ewing Oil Company LLC original debt note of $273,500 issued by the company on October 30, 2013.
On August 5th, 2014, the Company issued a convertible promissory note in the amount of $36,750. The note was due on August 5th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 55% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the conversion date. On February 19, 2015, the note was cancelled by the holder resulting in a gain on extinguishment of debt of $38,329.
On April 23, 2015 10,000,000 shares were issued to an executive of the company for services
The offer and sale of all Shares of our common stock listed to the previous officers and directors and the selling shareholders identified in the S-1 were affected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Regulation S promulgated under the Securities Act. The Investor acknowledged the following: Subscriber is not a United States Person, nor is the Subscriber acquiring the Shares directly or indirectly for the account or benefit of a United States Person. None of the funds used by the Subscriber to purchase the Units have been obtained from United States Persons. For purposes of this Agreement, "United States Person" within the meaning of U.S. tax laws, means a citizen or resident of the United States, any former U.S. citizen subject to Section 877 of the Internal Revenue Code, any corporation, or partnership organized or existing under the laws of the United States of America or any state, jurisdiction, territory or possession thereof and any estate or trust the income of which is subject to U.S. federal income tax irrespective of its source, and within the meaning of U.S. securities laws, as defined in Rule 902(o) of Regulation S, means:
(i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or corporation if organized under the laws of any foreign jurisdiction, and formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts. There have been no issuances of preferred stock.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the years ended August 31, 2015 or 2014.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Our Current Business
RESULTS OF OPERATIONS
The following is a discussion and analysis of our results of operation for the years ended August 31, 2015 and 2014 and the factors that could affect our future financial condition. This discussion and analysis should be read in conjunction with our audited financial statements and the notes thereto included elsewhere in this annual report. Our financial statements are prepared in accordance with United States generally accepted accounting principles. All references to dollar amounts in this section are in United States dollars unless expressly stated otherwise.
Revenue
$
−
$
−
Operating Expenses
(342,209)
(1,218,037)
Other Expenses
(573,641)
(520,498)
Net Loss
$
(915,850)
$
(1,738,535)
Revenue
Our gross revenue for the years ended August 31, 2015 and 2014 was $0 and $0. Prior revenues and cost of sales have been included in income from discontinued operations.
Operating Costs and Expenses
The major components of our expenses for the years ended August 31, 2015 and 2014 are outlined below:
Operating expenses
Professional fees
$
114,693
$
362,957
Research and development
40,000
-
Travel and promotion
30,365
52,817
Exploration Costs
3,111
278,500
Other general & administrative
154,040
523,763
Total operating expenses
$
342,209
$
1,218,037
Operating Expenses
The increase in our operating costs for the year ended August 31, 2015, compared to the year ended August 31, 2014, was mainly due to non-cash expenses related to share issuance for services included in professional fees, research and development and other general and administrative.
Working Capital
Current Assets
$
16,293
$
11,489
Current Liabilities
2,916,846
2,488,490
Working Capital Deficiency
2,900,553
2,477,001
Cash Flow
Cash Used in Operating Activities
$
(100,954)
$
(318,197)
Cash Used in Investing Activities
(3,572)
-
Cash Provided by Financing Activities
109,330
318,019
Net Change in Cash
$
4,804
$
(178)
The Company had cash of $16,293, accounts payable and accrued liabilities of $214,230 derivative liability of $432,293, accrued interest $532,454 related party payable $995,698, notes payable $184,295 and unclaimed debt of $557,876 as of August 31, 2015. In comparison, the Company had cash of $11,489, accounts payable and accrued liabilities of $319,821 derivative liability of $106,785, accrued interest $383,450 related party payable $1,324,848 and notes payable $353,586 as of August 31, 2014.
Cash Used In Operating Activities
The Company used cash in operating activities in the amount of $100,954 and $318,197 during the years ended August 31, 2015 and 2014. Cash used in operating activities was funded by cash from financing activities.
Cash From Investing Activities
In 2015 the Company purchased fixed assets of $3,572. No use of cash in 2014.
Cash from Financing Activities
In 2015, the Company funded its operations through the issuance of $109,330 in related party and other notes payable and interest expense $318,019 in 2014.
Due to the "startup" nature of our business, we expect to incur losses as it expands. To date, our cash flow requirements have been primarily met by equity financings. Management expects to keep operating costs to a minimum until cash is available through financing or operating activities. Management plans to continue to seek other sources of financing on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all. In the event Cherubim Interests Inc. is unable to generate sufficient profits or unable to obtain additional funds for our working capital needs, we may be forced to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of the Company's operations. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
Going Concern
The audited financial statements for the years ended August 31, 2015 and 2014 have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has generated $0 in revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate substantial earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at August 31, 2015, our company has accumulated losses of $(4,215,721) since inception. As we do not have sufficient funds for our planned operations, we will be required to raise additional funds for operations.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended August 31, 2015 our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Future Financings
We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to secure sufficient funding from the sale of our common stock to fund our marketing plan and operations. At this time, we cannot provide investors with any assurance that we will be able to secure sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
CHERUBIM INTERESTS INC.
FINANCIAL STATEMENTS
August 31, 2015 and 2014
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Cherubim Interests Inc., Inc.
We have audited the accompanying balance sheets of Cherubim, Inc. (the “Company”) as of August 31, 2015 and 2014, and the related statements of operations, stockholders’ equity, and cash flows for the years the ended. Cherubim Interests Inc., Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audit the financial statements referred to above present fairly, in all material respects, the financial position of Cherubim Interests Inc., Inc. as of August 31, 2015 and 2014 and the results of its operations and its cash flows for the years ended August 31, 2015 and 2014 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, The Company has not earned revenue, has suffered net losses and has had negative cash flows from operating activities during the years ended August 31, 2015 and 2014. These matters 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 relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
/s/ KLJ & Associates, LLP
KLJ & Associates, LLP
Edina, MN
December 15, 2015
5201 Eden Avenue
Suite 300
Edina, MN 55436
630.277.2330
CHERUBIM INTERESTS INC.
Balance Sheets
See accompanying notes to financial statements.
CHERUBIM INTERESTS INC.
Statements of Operations
See accompanying notes to financial statements.
CHERUBIM INTERESTS INC.
Statement of Changes in Stockholders' Equity (Deficit)
See accompanying notes to financial statements.
CHERUBIM INTERESTS INC.
Statements of Cash Flows
See accompanying notes to financial statements.
CHERUBIM INTERESTS INC.
Notes to Financial Statements
August 31, 2015 and 2014
NOTE 1 - NATURE OF BUSINESS
The Company was incorporated in the State of Nevada, United States of America on September 27, 2006 and its fiscal year end is August 31. The Company was engaged in sales of new food products produced or developed by North American companies to foreign markets and discontinued that business in August 2009. The Company previously operated in the oil and gas industry, focused on the exploration for and development of oil and gas properties. Cherubim Interests now targets alternative, commercial, single and multifamily dwelling opportunities for the purpose of investment purchase. It also provides renovation services to third party multifamily dwelling unit owners on a turn-key basis. Cherubim Interests specializes in covering the entire spectrum of development - including due diligence, acquisition, planning, construction, renovation, and property management. This comprehensive expertise allows the company to provide complete beginning-to-end development programs for all acquisitions.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements present the balance sheet, statements of operations, stockholders' equity and cash flows of the Company. These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash and cash equivalents include short-term, highly liquid investments with maturities of less than three months when acquired.
Oil and Gas Property
The Company applies the successful efforts method of accounting for oil and gas properties. When incurred, exploration costs such as exploratory geological and geophysical costs, delay rentals, and exploration overhead will be charged against earnings as incurred. If an exploratory well provides evidence to justify potential completion as a producing well, drilling costs associated with the well will be initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. Acquisition costs of unproved properties are periodically assessed for impairment and will be transferred to proven oil and gas properties to the extent the costs are ultimately associated with successful exploration activities. Any significant undeveloped leases will be assessed individually for impairment, based on the Company’s current exploration plans, and a valuation allowance is provided if impairment is indicated.
Income taxes
The Company accounts for income taxes under ASC 740 "Income Taxes" which codified SFAS 109, "Accounting for Income Taxes" and FIN 48 “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
CHERUBIM INTERESTS INC.
Notes to Financial Statements
August 31, 2015 and 2014
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, accounts payable, notes payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at August 31, 2015 and 2014. The company notes that derivative liability as of August 31, 2015 is considered level III in the fair value hierarchy.
FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
The Company does not have any assets or liabilities measured at fair value on a recurring basis at August 31, 2014. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the years ended August 31, 2015 and 2014
Depreciation, Depletion, and Amortization
Upon beginning exploratory activities, costs of drilling and equipping successful wells, costs to construct or acquire facilities, associated asset retirement costs, and capital lease assets used in oil and gas activities will be depreciated using the unit-of-production (UOP) method based on total estimated proved developed oil and gas reserves. Costs of acquiring proved properties, including leasehold acquisition costs transferred from unproved properties and associated asset retirement costs, will be depleted using the UOP method based on total estimated proved developed and undeveloped reserves. Mineral properties will also deplete using the UOP method. All other properties are stated at historical acquisition cost, net of impairments, and are depreciated using the straight-line method over the useful lives of the assets, which range from 3 to 15 years for furniture and equipment, up to 40 years for buildings, and up to 47 years for gathering facilities.
Earnings Per Share Information
FASB ASC 260, “Earnings Per Share” provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. Basic and diluted loss per share were the same, at the reporting dates, as there were no common stock equivalents outstanding.
Share Based Expenses
ASC 718 "Compensation - Stock Compensation" codified SFAS No. 123, which prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. , may be classified as either equity or liabilities.
CHERUBIM INTERESTS INC.
Notes to Financial Statements
August 31, 2015 and 2014
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share Based Expenses (continued)
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.
Revenue recognition
The Company recognizes revenue when services are rendered on the accrual basis of accounting in accordance with generally accepted accounting principles in ASC 605. The Company does not recognize revenue until all four of the following criteria are met: (1) Persuasive evidence of an arrangement exists, (2) Services have been rendered, (3) The seller’s price to the buyer is fixed and (4) Collectability is reasonably assured. We have not yet recognized revenue since inception on September 27, 2006.
Recent Accounting Pronouncements
On June 10, 2014, the Financial Accounting Standards Board ("FASB") issued update ASU 2014-10, Development Stage Entities (Topic 915). Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders’ equity, (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued. The Company has elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information on the respective financial statements
NOTE 3 - GOING CONCERN
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. The Company has accumulated deficit since inception of $4,215,721.We have negative working capital of $2,900,553 as of August 31, 2015. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has minimal cash and no material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company.
NOTE 4 - STOCKHOLDERS' EQUITY
The total number of common shares authorized that may be issued by the Company is 500,000,000 shares with a par value of $.0001 per share and no other class of shares is authorized.
Subsequent to August 31, 2015, the Company increased the total number of common shares authorized that may be issued by the Company to 5,000,000,000, authorized the issuance of 50,000,000 preferred shares and set the par value of the common and preferred shares to $.00001 per share.
As part of the share consolidation completed in May 2015, all applicable references to the number of shares and per share information has been restated on the basis of 15 old common shares for 1 new common share.
CHERUBIM INTERESTS INC.
Notes to Financial Statements
August 31, 2015 and 2014
NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)
On November 5, 2013 333,333 shares issued to a consultant for services performed.
On June 20, 2014 6,667 Shares were issued to vendor for services performed
On June 20, 2014 933,333 shares were issued to executives of the company for services performed.
On June 20, 2014 33,333 Shares were issued to advisory board member
On July 1, 2014 410,000 shares were issued to executives of the company for services performed.
On July 11, 2014 133,333 shares were issued to executives of the company for services performed.
On July 11, 2014 180,000 shares were issued related to a debt conversion of $81,000 of principle the market price per share was $0.044
On August 20, 2014 100,000 Shares were issued to advisory board members for services performed.
On November 26, 2014 73,333 shares were issued related to a debt conversion of $33,000 of principle the market price per share was $0.07
On October 21, 2014 66,667 shares were issued to Cloud Solutions LLC for services.
On October 29, 2014 200,000 shares were issued to Corporate Ads LLC for services.
On February 11, 2015 266,667 shares were issued to an executive of the company for services.
On February 11, 2015 66,666 shares were issued for services.
On February 13, 2015 88,889 shares were issued on conversion of a convertible promissory note.
On February 18, 2015 12,903 shares were issued on conversion of a convertible promissory note.
On April 23, 2015 666,667 shares were issued to an executive of the company for services.
On April 29, 2015 13,675 shares were issued on conversion of a convertible promissory note.
On June 19, 2015 10,700,000 shares were issued to executives of the company for services.
On June 19, 2015 1,800,000 shares were issued for services.
On June 19, 2015 40,000,000 shares were issued for services.
On July 1, 2015 333,333 shares were issued to John Seidel for consulting services
On July 1, 2015 200,000 shares were issued to Antevora Capital Partners for consulting services
On July 6, 2015 174 shares were issued for services.
On July 21, 2015 11, 5000,000 shares were issued on conversion of a convertible promissory note.
On July 22, 2015 112,074 shares were issued on conversion of a convertible promissory note.
On July 27, 2015 750,000 shares were issued to Quality Stocks LLC for services
CHERUBIM INTERESTS INC.
Notes to Financial Statements
August 31, 2015 and 2014
NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)
On July 30, 2015 3,892,157 shares were issued on conversion of a convertible promissory note.
On August 4, 2015 148,689 shares were issued on conversion of a convertible promissory note.
On August 29, 2015 50,000,000 shares were issued to executives of the company for services.
NOTE 5 - CONVERTIBLE NOTES PAYABLE
On August 5th, 2014, the Company issued a convertible promissory note in the amount of $32,500. The note was due on May 7th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. On February 13, 2015, $12,000 of the principal was converted into 1,333,333 common shares resulting in a loss on extinguishment of debt of $8,667.
On August 5th, 2014, the Company issued a convertible promissory note in the amount of $36,750. The note was due on August 5th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 55% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the conversion date.
On August 12th, 2014, the Company issued a convertible promissory note in the amount of $25,000. The note was due on August 12th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the fifteen (14) trading day period ending on the latest complete trading day prior to the conversion date. On February 18, 2015, $1,500 of the principal was converted into 193,548 common shares resulting in a loss on extinguishment of debt of $1,577.
On September 8th, 2014, the Company issued a convertible promissory note in the amount of $32,500. The note was due on June 10th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.
On December 19th, 2014, the Company issued a convertible promissory note in the amount of $33,000. The note is due on September 26th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.
On June 19, 2015 the Company issued a convertible promissory note to Gold Coast Capital, LLC in the amount of $25,000.
The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 70% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the forty-five (45) trading day period ending on the latest complete trading day prior to the conversion date. This was a debt purchase of Ewing Oil Company LLC original debt note of $273,500 issued by the company on October 30, 2013.
On July 31, 2015, the Company issued a convertible promissory note to Auctus Fund LLC. in the amount of $45,750. The note is due on May 1, 2016 and bears interest at 10% per annum. The loan becomes convertible 300 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied by the lowest trading price during the previous twenty-five (25) day trading period ending on the latest complete trading day prior to the conversion date.
CHERUBIM INTERESTS INC.
Notes to Financial Statements
August 31, 2015 and 2014
.
NOTE 6 - DERIVATIVE LIABILITIES
In accordance with AC 815, the Company has bifurcated the conversion feature of their convertible notes and recorded a derivative liability on the date each note became convertible. The derivative liability was then revalued on each reporting date. The Company uses the Black-Scholes option pricing model to value the derivative liability. Included in the model to value the derivative liabilities of the above loans are the following assumptions: stock price at valuation date of $0.047 - $0.20, exercise price of $0.004 - $0.010, dividend yield of zero, years to maturity of 0.07 - 0.77, a risk free rate of 0.06% - 0.11%, and annualized volatility of 127% - 315%. The above loans were all discounted in full based on the valuations and the Company recognized an additional derivative expense of $78,814 upon recording of the derivative liabilities. Once the loans are fully converted, the remaining derivative liability is reclassified to equity as additional paid-in capital. As of August 31, 2015, unamortized debt discount totaling $33,000 remained.
ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with the above convertible debt. During the period ended August 31, 2015, the Company recorded a total change in the value of the derivative liabilities of $260,008.
From inception to August 31, 2015 the Company has not granted any stock options.
NOTE 7 - INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Under ACS 740 “Income Taxes,” when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carryforward period.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the period ended August 31, 2015, applicable under ACS 740. As a result of the adoption of ACS 740, we did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet.
The provision for federal income tax consists of the following:
Federal income tax benefit attributable
Current operations
$
225,852
$
608,487
Valuation allowance
(225,852)
(608,487)
Net deferred tax asset
$
−
$
−
A reconciliation of income taxes computed at the 35% statutory rate to the income tax recorded is as follows:
Net operating loss carry forward
$
1,364,357
$
1,138,505
Valuation allowance
(1,364,357)
(1,138,505)
Net deferred tax asset
$
−
$
−
The Company did not pay any income taxes during the years ended August 31, 2015 or 2014.
The net federal operating loss carry forward will expire in 2032. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.
CHERUBIM INTERESTS INC.
Notes to Financial Statements
August 31, 2015 and 2014
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company has current loans totaling $995,698 to fund operations which carry varying interest rates. As of August 31, 2015 and 2014, the Company owed $995,698 and $1,324,848 of principal plus accrued interest of $530,875 and $383,450. The loans are unsecured and due on demand and as such are included in current liabilities.
NOTE 9 - NOTE RECEIVABLE
The Company has advanced funds totaling $540,010 to Steele Resources with the intention of establishing a joint venture. The venture did not materialize and Steele Resources has agreed to return the funds to the Company. During the year ended August 31, 2014, the Company established a full reserve against the balance as a result.
The Company has advanced funds totaling $338,344 to Global Finishing with the intention of establishing a joint venture. The venture did not materialize. During the year ended August 31, 2014, the Company established a full reserve against the balance as a result.
During the year ended August 31, 2015, the Company has written off the notes receivable and the related reserves.
NOTE 10 - SUBSEQUENT EVENTS
On August 5th, 2014, the Company issued a convertible promissory note to KBM Worldwide in the amount of $32,500. The note is due on May 7th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. On September 24, 2015 $760.00 of the remaining principle amount of the note together with $1,300.00 of accrued and unpaid interest totaling $2,060.00 was converted into 1,373,333 common shares of the company resulting in an extinguishment of debt of $32,500.00. THIS NOTE HAS BEEN PAID IN FULL
On August 12th, 2014, the Company issued a convertible promissory note in the amount of $25,000. The note was due on August 12th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the fifteen (14) trading day period ending on the latest complete trading day prior to the conversion date. On February 18, 2015, $1,500 of the principal was converted into 193,548 common shares resulting in a loss on extinguishment of debt of $1,577. To date $18,000 of the principle debt of $25,000 has been converted into 48,606,681 shares.
On September 8th, 2014, the Company issued a convertible promissory note to KBM Worldwide in the amount of $32,500. The note is due on June 10th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. On October 22, 2015 $1,700.00 of the remaining principle amount of the note together with the accrued and unpaid interest was converted into 2,023,810 common shares of the company resulting in an extinguishment of debt of $46,425.00. THIS NOTE HAS BEEN PAID IN FULL
On December 19th, 2014, the Company issued a convertible promissory note to KBM Worldwide in the amount of $33,000. The note is due on September 26th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. On November 22, 2015 the remaining principle amount of the note together with the accrued and unpaid interest was converted into common shares of the company resulting in an extinguishment of debt of $33,000.00. THIS NOTE HAS BEEN PAID IN FULL
CHERUBIM INTERESTS INC.
Notes to Financial Statements
August 31, 2015 and 2014
NOTE 10 - SUBSEQUENT EVENTS (CONTINUED)
On June 19, 2015 the Company issued a convertible promissory note to Gold Coast Capital, LLC in the amount of $25,000.
The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 70% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the forty-five (45) trading day period ending on the latest complete trading day prior to the conversion date. This was a debt purchase of Ewing Oil Company LLC original debt note of $273,500 issued by the company on October 30, 2013. To date, $19,975.00 of the $25,000 of the debt has been converted into 20,920,958 shares.
On October 14, 2015, the Board of Directors of Cherubim Interests, Inc. (the “Company”) approved the amendment and restatement of the Company’s Articles of Incorporation attached hereto as Exhibit 3(i) (the “Restatement”). The purpose of the Restatement was to:
i.
Increase the number of authorized shares of Common Stock to 5,000,000,000;
ii.
Increase the number of authorized shares of Preferred Stock to 50,000,000;
iii.
Set the par value of the Common and Preferred Stock to $0.00001;
iv.
Authorize the Board of Directors to issue “blank check” Preferred Stock and fix the rights, preferences, privileges, qualifications, limitations, and restrictions of any Preferred Stock issued by the Company, including the number of shares constituting any series or the designation of such series.
Also on October 14, 2015, the Board of the Company approved the amendment and restatement of the Certificates of Designation to the Articles of Incorporation of the Company’s Series A and B Preferred Stock (“the Preferred Classes”). The rights, preferences, privileges, restrictions and characteristics of the Preferred Classes are detailed in the Amended Certificate of Designation to the Articles of Incorporation filed hereto as exhibits 3(ii) and 3(iii) to this filing.
On October 14, 2015 the Company declared a dividend of 1 Series B Preferred share per 100,000 shares of common stock to the owners of record as of the close of business on October 14, 2015.
On October 27, 2015 $15,000 of affiliate debt was converted into 300,000,000 restricted shares of the company’s common stock.
On November 9, 2015 $90,000 of affiliate debt was converted into 1,800,000,000 restricted shares of the company’s common stock.
On December 10, 2015 $507,806.96 of the company’s debt was converted into Series B Preferred Stock at a price of $2.50.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
(a)
Evaluation of Disclosure Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer, who are its principal executive, completed an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rules 13a-15 (e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period (August 31, 2014) covered by this Form 10-K. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer, have concluded the Company's disclosure controls and procedures, as of the end of the fiscal year covered by this Form 10-K were ineffective because of comments from the SEC that required additional disclosure and restatement of other disclosed information.
Conclusions
Based upon the evaluation of our controls, the Chief Executive Officer and Chief Financial Officer have concluded that, the disclosure controls and procedures are ineffective providing reasonable assurance that material information relating to the company activity is communicated in sufficient detail. Although, changes have been made to provide the level of detail that is required in the company filings based upon the SEC comments, the company is not prepared at this time to remove the ineffective status of the disclosure controls and procedures. The company will continue to work in these deficiencies.
(b)
Management's Annual Report on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and for assessing the effectiveness of internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. Management evaluates the effectiveness of the Company’s internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - “Integrated Framework.” Management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of August 31, 2015 and concluded that it is ineffective in assuring that the financial reports of the Company are free from material errors or misstatements.
Management has identified material weaknesses and is taking action to remedy and remove the weakness in its internal controls over financial reporting:
Lack of an independent board of directors with financial experience for Audit Committee and Financial Disclosure. The current Board of Directors is evaluating expanding the board of directors to include additional independent directors with financial Experience. The company, as financial resources are available plans to utilize outside CPA or other professional services to review the company financial reporting.
Lack of Segregation of Duties, as the same Officer/Director is responsible for initiating and recording transactions, thereby creating segregation of duties weakness. The company is working on funding and/or joint ventures and acquisitions which will lend support to the current sole officer of the corporation.
Comment letters from the SEC to expand/clarify information submitted in the prior filings. The company has addressed the initial comment letters from the SEC and is in the process of amending the related filings. The company will continue to review/research the SEC guidelines in insure future filings contain the necessary information and proper classification.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting 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.
This Annual Report on Form 10K 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 pursuant to rules of the SEC that permit the Company to provide only management's report in this Annual Report on Form 10-K.
Conclusions
Based upon the evaluation of our controls, the Chief Executive Officer and Chief Financial Officer has concluded that, the internal control over financial reporting are ineffective providing reasonable assurance that material information relating to the company activity is communicated in sufficient detail. Although, changes have been made to provide the level of detail that is required in the company filings based upon the SEC comments, the company is not prepared at this time to remove the ineffective status of the internal control over financial reporting The Company will continue to work in these deficiencies.
(c)
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting that occurred during the period ended August 31, 2015 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
All directors of our company hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. The officers of our company are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.
Our directors, executive officers and other significant employees, their ages, positions held and duration each person has held that position, are as follows:
Name
Position Held with the Corporation
Age
Date First Elected / Appointed
Patrick Johnson
CEO, Director
November 14, 2013
Gary Fewell
COO, Director
April 27, 2015
Corbin Grubbs
CFO
April 27, 2015
Charles Everett
Chairman
April 27, 2015
Business Experience
Our directors, executive officers and control persons have not been involved in any of the following events during the past ten years except as noted below:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Cherubim Interests Inc. does not have any committees of the board of directors at this time. The board of directors does not have a nominations committee because there is two directors and shareholder suggestions would be known to the entire board. As such, the board of directors believes there will be sufficient communication by shareholders with the board about matters and nominees to be brought to its attention.
Cherubim Interests Inc. directors functions as an audit committee and performs some of the same functions as an audit committee including: (1) selection and oversight of the Company's independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; and (3) engaging outside advisors. Cherubim Interests Inc., board of directors has determined that its directors are not an "audit committee financial expert" within the meaning of the rules and regulations of the SEC. Cherubim Interests Inc., board of directors has determined, however, that its directors are able to read and understand fundamental financial statements and has business experience that results in that member's financial sophistication. Accordingly, the board of directors have directed that, in light of the material weaknesses identified in our disclosure controls and procedures and internal control over financial reporting, that the CEO become more familiar with the SEC Filing requirements and the company will seek additional outside assistance as funding becomes available to provide such a service.
The directors will serve as directors until our next annual shareholder meeting or until a successor is elected who accepts the position. Directors are elected for one-year terms. Officers hold their positions at the will of the Board of Directors, absent any employment agreement. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of Cherubim Interests Inc.'s affairs.
Code of Ethics
The Board of Directors adopted a Code of Business Conduct and Ethics applicable to all of our directors, officers and employees, including our CEO and senior officers. A copy of our Code of Ethics is attached hereto as an Exhibit 14. Shareholders may also request a copy of the Code of Ethics from: Cherubim Interests Inc., Investor Relations, 1304 Norwood Dr. Bedford TX. 76022.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of our common stock. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth information concerning all compensation paid or accrued by us to our President and Chief Executive Officer and Chief Financial Officer and Director during the fiscal period ended August 31, 2015.
Option Grants in 2015 and 2014
No options were granted during 2015 or 2014.
Aggregated Option Exercises in 2015 and 2014 Year-End Option Values
No options were exercised by our Officers or Directors during 2015 or 2014.
Stock Incentive Plan - Awards in 2015 and 2014
During 2015 or 2014, no shares, options or other rights were granted to any of our employees or Officers.
Director Compensation
No options were granted or payments made in compensation for services rendered to any Cherubim Interests Inc. directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our shares of common stock at August 31, 2015, by (i) each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock, (ii) each of our directors, (iii) our executive officers, and (iv) by all of our directors and executive officers as a group. Each person named in the table, has sole voting and investment power with respect to all shares shown as beneficially owned by such person and can be contacted at our executive office address.
Title of Class
Name of Owner
Amount and Nature of Beneficial Ownership
Percent of Class (%)
Common
Patrick Johnson
29,180,786
23.3%
Common
Gary Fewell
12,514,118
10.0%
Common
Corbin Grubbs
6,550,000
5.2%
Common
Charles Everett
38,742,702
31.0%
The percent of class is based on 125,025,261 shares of common stock issued and outstanding as of the date of this annual report.
The Company has no securities authorized for issuance under equity compensation plans.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During the fiscal year ended August 31, 2015:
The CEO, CFO, and COO provide management services to the Company. During the year ended August 31, 2015 accrued management services of $176,500 were charged to operations.
Otherwise, no director and officer, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, nor any promoter, nor any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us.
RELATED PARTY NOTE HOLDERS:
NAME
AMOUNT
OFFICER/ DIRECTOR
SHAREHOLDER
A. Krioukov
22,130
YES
John Gingerich
655,700
Ewing
273,500
YES
Marcus Mueller
11,000
YES
P. Johnson
5,128
YES
YES
Wayne Doss
YES
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Under our audit committee's policy, pre-approval is generally provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, the audit committee may also pre-approve particular services on a case-by-case basis. Our audit committee approved all services that our independent accountants provided to us in the past two fiscal years.
PART IV
ITEM 15. EXHIBITS
(a)
The following exhibits are included as part of this report:
Exhibit Number
Title of Document
Code Of Conduct
31.1
Sec.302 Certification of CEO/CFO
32.1
Sec.906 Certification of CEO/CFO
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cherubim Interests Inc.
/s/ Patrick Johnson
Patrick Johnson
CEO/CFO, and Director
Dated: December 15, 2015
/s/ Corbin Grubbs
Corbin Grubbs
CFO
Dated: December 15, 2015
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.
Cherubim Interests Inc.
/s/ Patrick Johnson
Patrick Johnson
CEO and Director
Dated: December 15, 2015
/s/ Corbin Grubbs
Corbin Grubbs
CFO
Dated: December 15, 2015
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
(a)
Evaluation of Disclosure Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer, who are its principal executive, completed an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rules 13a-15 (e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period (August 31, 2014) covered by this Form 10-K. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer, have concluded the Company's disclosure controls and procedures, as of the end of the fiscal year covered by this Form 10-K were ineffective because of comments from the SEC that required additional disclosure and restatement of other disclosed information.
Conclusions
Based upon the evaluation of our controls, the Chief Executive Officer and Chief Financial Officer have concluded that, the disclosure controls and procedures are ineffective providing reasonable assurance that material information relating to the company activity is communicated in sufficient detail. Although, changes have been made to provide the level of detail that is required in the company filings based upon the SEC comments, the company is not prepared at this time to remove the ineffective status of the disclosure controls and procedures. The company will continue to work in these deficiencies.
(b)
Management's Annual Report on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and for assessing the effectiveness of internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. Management evaluates the effectiveness of the Company’s internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - “Integrated Framework.” Management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of August 31, 2015 and concluded that it is ineffective in assuring that the financial reports of the Company are free from material errors or misstatements.
Management has identified material weaknesses and is taking action to remedy and remove the weakness in its internal controls over financial reporting:
Lack of an independent board of directors with financial experience for Audit Committee and Financial Disclosure. The current Board of Directors is evaluating expanding the board of directors to include additional independent directors with financial Experience. The company, as financial resources are available plans to utilize outside CPA or other professional services to review the company financial reporting.
Lack of Segregation of Duties, as the same Officer/Director is responsible for initiating and recording transactions, thereby creating segregation of duties weakness. The company is working on funding and/or joint ventures and acquisitions which will lend support to the current sole officer of the corporation.
Comment letters from the SEC to expand/clarify information submitted in the prior filings. The company has addressed the initial comment letters from the SEC and is in the process of amending the related filings. The company will continue to review/research the SEC guidelines in insure future filings contain the necessary information and proper classification.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting 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.
This Annual Report on Form 10K 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 pursuant to rules of the SEC that permit the Company to provide only management's report in this Annual Report on Form 10-K.
Conclusions
Based upon the evaluation of our controls, the Chief Executive Officer and Chief Financial Officer has concluded that, the internal control over financial reporting are ineffective providing reasonable assurance that material information relating to the company activity is communicated in sufficient detail. Although, changes have been made to provide the level of detail that is required in the company filings based upon the SEC comments, the company is not prepared at this time to remove the ineffective status of the internal control over financial reporting The Company will continue to work in these deficiencies.
(c)
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting that occurred during the period ended August 31, 2015 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
All directors of our company hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. The officers of our company are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.
Our directors, executive officers and other significant employees, their ages, positions held and duration each person has held that position, are as follows:
Name
Position Held with the Corporation
Age
Date First Elected / Appointed
Patrick Johnson
CEO, Director
November 14, 2013
Gary Fewell
COO, Director
April 27, 2015
Corbin Grubbs
CFO
April 27, 2015
Charles Everett
Chairman
April 27, 2015
Business Experience
Our directors, executive officers and control persons have not been involved in any of the following events during the past ten years except as noted below:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Cherubim Interests Inc. does not have any committees of the board of directors at this time. The board of directors does not have a nominations committee because there is two directors and shareholder suggestions would be known to the entire board. As such, the board of directors believes there will be sufficient communication by shareholders with the board about matters and nominees to be brought to its attention.
Cherubim Interests Inc. directors functions as an audit committee and performs some of the same functions as an audit committee including: (1) selection and oversight of the Company's independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; and (3) engaging outside advisors. Cherubim Interests Inc., board of directors has determined that its directors are not an "audit committee financial expert" within the meaning of the rules and regulations of the SEC. Cherubim Interests Inc., board of directors has determined, however, that its directors are able to read and understand fundamental financial statements and has business experience that results in that member's financial sophistication. Accordingly, the board of directors have directed that, in light of the material weaknesses identified in our disclosure controls and procedures and internal control over financial reporting, that the CEO become more familiar with the SEC Filing requirements and the company will seek additional outside assistance as funding becomes available to provide such a service.
The directors will serve as directors until our next annual shareholder meeting or until a successor is elected who accepts the position. Directors are elected for one-year terms. Officers hold their positions at the will of the Board of Directors, absent any employment agreement. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of Cherubim Interests Inc.'s affairs.
Code of Ethics
The Board of Directors adopted a Code of Business Conduct and Ethics applicable to all of our directors, officers and employees, including our CEO and senior officers. A copy of our Code of Ethics is attached hereto as an Exhibit 14. Shareholders may also request a copy of the Code of Ethics from: Cherubim Interests Inc., Investor Relations, 1304 Norwood Dr. Bedford TX. 76022.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of our common stock. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth information concerning all compensation paid or accrued by us to our President and Chief Executive Officer and Chief Financial Officer and Director during the fiscal period ended August 31, 2015.
Option Grants in 2015 and 2014
No options were granted during 2015 or 2014.
Aggregated Option Exercises in 2015 and 2014 Year-End Option Values
No options were exercised by our Officers or Directors during 2015 or 2014.
Stock Incentive Plan - Awards in 2015 and 2014
During 2015 or 2014, no shares, options or other rights were granted to any of our employees or Officers.
Director Compensation
No options were granted or payments made in compensation for services rendered to any Cherubim Interests Inc. directors.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our shares of common stock at August 31, 2015, by (i) each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock, (ii) each of our directors, (iii) our executive officers, and (iv) by all of our directors and executive officers as a group. Each person named in the table, has sole voting and investment power with respect to all shares shown as beneficially owned by such person and can be contacted at our executive office address.
Title of Class
Name of Owner
Amount and Nature of Beneficial Ownership
Percent of Class (%)
Common
Patrick Johnson
29,180,786
23.3%
Common
Gary Fewell
12,514,118
10.0%
Common
Corbin Grubbs
6,550,000
5.2%
Common
Charles Everett
38,742,702
31.0%
The percent of class is based on 125,025,261 shares of common stock issued and outstanding as of the date of this annual report.
The Company has no securities authorized for issuance under equity compensation plans.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During the fiscal year ended August 31, 2015:
The CEO, CFO, and COO provide management services to the Company. During the year ended August 31, 2015 accrued management services of $176,500 were charged to operations.
Otherwise, no director and officer, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, nor any promoter, nor any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us.
RELATED PARTY NOTE HOLDERS:
NAME
AMOUNT
OFFICER/ DIRECTOR
SHAREHOLDER
A. Krioukov
22,130
YES
John Gingerich
655,700
Ewing
273,500
YES
Marcus Mueller
11,000
YES
P. Johnson
5,128
YES
YES
Wayne Doss
YES
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Under our audit committee's policy, pre-approval is generally provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, the audit committee may also pre-approve particular services on a case-by-case basis. Our audit committee approved all services that our independent accountants provided to us in the past two fiscal years.
PART IV
ITEM 15. EXHIBITS
(a)
The following exhibits are included as part of this report:
Exhibit Number
Title of Document
Code Of Conduct
31.1
Sec.302 Certification of CEO/CFO
32.1
Sec.906 Certification of CEO/CFO
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cherubim Interests Inc.
/s/ Patrick Johnson
Patrick Johnson
CEO/CFO, and Director
Dated: December 15, 2015
/s/ Corbin Grubbs
Corbin Grubbs
CFO
Dated: December 15, 2015
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.
Cherubim Interests Inc.
/s/ Patrick Johnson
Patrick Johnson
CEO and Director
Dated: December 15, 2015
/s/ Corbin Grubbs
Corbin Grubbs
CFO
Dated: December 15, 2015
ITEM 15. EXHIBITS
(a)
The following exhibits are included as part of this report:
Exhibit Number
Title of Document
Code Of Conduct
31.1
Sec.302 Certification of CEO/CFO
32.1
Sec.906 Certification of CEO/CFO
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cherubim Interests Inc.
/s/ Patrick Johnson
Patrick Johnson
CEO/CFO, and Director
Dated: December 15, 2015
/s/ Corbin Grubbs
Corbin Grubbs
CFO
Dated: December 15, 2015
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.
Cherubim Interests Inc.
/s/ Patrick Johnson
Patrick Johnson
CEO and Director
Dated: December 15, 2015
/s/ Corbin Grubbs
Corbin Grubbs
CFO
Dated: December 15, 2015