Item 1. Description of Business
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
GENERAL
Lepota, Inc. was incorporated in the State of Nevada on December 9, 2013. We were formed to import and distribute cosmetic products in Russia.
We have identified number of Poland - based companies that produces high-quality innovative cosmetics that are not widely represented on the territory of Russia. We haven’t yet established any contracts with these firms. We intend to distribute their products in Russia through shops and Drugstores. We presently have a contract with a purchaser, Inter-beauty, which we believe has access to the intended market. This contract reached its expiration date on December 31, 2015. However an extension has been signed in order to prolong the same contract until December 31, 2018.
The main material terms of concluded with Inter-beauty are:
1. Organization of long-term cooperation.
2. The SUPPLIER (Lepota Inc.) shall supply the goods of the available assortment, and the PURCHASER (Inter-beauty) shall accept and pay for them within the periods set by this Contract.
3. The SUPPLIER shall supply the goods within 3 (three) working days after reception of order from the PURCHASER in written or electronic form subject to availability of ordered assortment at the SUPPLIER warehouse.
4. The quality of the goods to be supplied shall meet the legislation demands placed on the product quality that shall be confirmed by the availability of the appropriate certificates, conclusions, etc.
5. The Parties shall try to settle all disputes that can arise from this Contract or concerning it by means of bilateral negotiations, and in case of impossibility to reach an understanding these disputes shall be settled at Arbitration Court in the plaintiff jurisdiction.
6. Contract shall become effective from the moment of its signing by the persons authorized for it and shall now be effective up to December 31, 2018.
In addition, on November 20, 2015 we entered into an agreement with South Distributing Company (South Distributing). The agreement is valid until December 31, 2017. South Distributing would purchase our products on similar terms to the terms of the Inter-beauty contract. It is the Company’s intention to sell products to both Inter-beauty and South Distributing. The South Distributing agreement is intended to provide for additional sales, not replace the Inter-beauty agreement. We have target companies that we aim to work with on intercontinental level. These companies are based in U.S. and Japan. One American company in particular has nail accessories products that we find are not represented on the Russian market.
As of this date, we do not have any formal agreements with either of these companies based in U.S. or Japan.
We intend to search for marketable products through focus groups, which are in demand in the Russian markets nowadays and search for the firms that produce these products through out foreign markets.
We believe that products for import should be: unique, innovative, high-quality, attracting new customers to the shops and local networks, because of such product absence within the federal networks.
Our pricing model is based on the premise that the price should be the same for all territory of Russia and allow our clients to have a trading margin of at least 50% more than have the known multi-brand manufacturers of mass-market format.
THE PRINCIPLE OF BUILDING RELATIONSHIPS WITH THE MANUFACTURER
1. To begin, we determine the type of products that has the prospects for the development of sales. (range, design, product category, price, pricing model, packaging, uniqueness and company benefits.
2. Manufacturer’s selected products are determined through our search for new businesses on international trade exhibition taking place in Bologna, Moscow, Guangzhou and Istanbul.
3. From producers who have a product suitable for all specified criteria (item 1) we take their prospectus coordinates and samples.
4. Next, we conduct focus groups through which we select the most interesting position.
5. From the manufacturer we then request price lists for these positions. When the pricing of manufacturer and our price model for a particular product coincide - communications for an appointment begin in order to discuss all the terms of the contract for the products supply.
6. Following the meetings, subject to agreements on all issues - formal supply contract is produced, we continue mutual operations including delivery of the product itself.
EMPLOYEES AND EMPLOYMENT AGREEMENTS
At present, we have no employees other than our officer and director. We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans;
however, we may adopt such plans in the future. There are presently no personal benefits available to any officers, directors or employees.
Item 1A.
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2.
Item 2. Description of Property
We do not own any real estate or other properties.
Item 3.
Item 3. Legal Proceedings
We know of no legal proceedings to which we are a party or to which any of our property is the subject which are pending, threatened or contemplated or any unsatisfied judgments against us.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
There is a limited public market for our common shares. Our common shares are not quoted on the OTC Bulletin Board at this time. Trading in stocks quoted on the OTC Bulletin Board is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
OTC Bulletin Board securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
As of July 31, 2016, no shares of our common stock have traded.
Number of Holders
As of July 31, 2017, the 5,970,000 issued and outstanding shares of common stock were held by a total of 9 shareholders of record including our director, Iurii Iurtaev.
Dividends
No cash dividends were paid on our shares of common stock during the fiscal years ended July 31, 2017 and 2016. We have not paid any cash dividends since our inception and do not foresee declaring any cash dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
None.
Purchase of our Equity Securities by Officers and Directors
None.
Other Stockholder Matters
None.
Item 6.
Item 6. Selected Financial Data
Not applicable.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
RESULTS OF OPERATIONS
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
FISCAL YEAR ENDED JULY 31, 2017 COMPARED TO FISCAL YEAR ENDED JULY 31, 2016.
Our net losses for the fiscal years ended July 31, 2017 and 2016 were $1,476 and $1,355. During fiscal years ended July 31, 2017 and 2016, the Company generated $5,730 and $4,270 in revenue.
During the fiscal year ended July 31, 2017, we incurred general and administrative expenses of $7,206 compared to $5,625 incurred during fiscal year ended July 31, 2016.
General and administrative expenses generally include legal fees, auditor and accounting expenses.
The weighted average number of shares outstanding was 5,766,548 for the fiscal year ended July 31, 2017 and 4,995,027 for the fiscal year ended July 31, 2016.
LIQUIDITY AND CAPITAL RESOURCES
FISCAL YEAR ENDED JULY 31, 2017 and 2016
As of July 31, 2017, our total assets were $7,781 comprised of cash and cash equivalents and our total liabilities were $9,685 comprised of advances from stockholder.
As of July 31, 2016, our total assets were 3,837 and total liabilities consisted of advances from stockholders of $4,210, and loans from our director $5,625 and deferred revenue of $1,730. Stockholders’ equity increased from $(7,728) as of July 31, 2016 to $(1,904) as of July 31, 2017.
Cash Flows from Operating Activities
We have generated positive cash flows from operating activities for the fiscal year ended July 31, 2016 at $375. The company generated negative cash flows from operating activities for the fiscal year ended July 31, 2017 at $(3,206).
Cash Flows from Financing Activities
We have financed our operations primarily from either advancements or the issuance of equity and debt instruments. For the fiscal year ended July 31, 2016, net cash from financing activities was $3,742 consisting of shareholders loan of $1,342 and capital stock of $ 2,900 less the subscription receivable of $500. For the fiscal year ended July 31, 2017, net cash from financing activities was $7,150 consisting of shareholder loan of (150) and capital stock of $6,800.
PLAN OF OPERATION AND FUNDING
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of software; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
MATERIAL COMMITMENTS
As of the date of this Annual Report, we do not have any material commitments.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Annual Report, we do not have any offbalance 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 investors.
GOING CONCERN
The independent auditors' report accompanying our July 31, 2017 and July 31, 2016 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable to smaller reporting companies.
Item 8.
Item 8. Financial Statements and Supplementary Data
LEPOTA INC.
(A DEVELOPMENT STAGE COMPANY)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
MICHAEL GILLESPIE & ASSOCIATES, PLLC
CERTIFIED PUBLIC ACCOUNTANTS
10544 ALTON AVE NE
SEATTLE, WA 98125
206.353.5736
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Lepota, Inc.
We have audited the accompanying balance sheets of Lepota, Inc. as of July 31, 2017 and 2016 and the related statements of operations, changes in stockholder’s deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. 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 the financial statements referred to above present fairly, in all material respects, the financial position of Lepota, Inc. for the years ended July 31, 2017 and 2016 and the results of its operations and cash flows for the years then ended in conformity with generally accepted accounting principles 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, although the Company has limited operations it has yet to attain profitability. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note #3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ MICHAEL GILLESPIE & ASSOCIATES, PLLC
Seattle, Washington
December 11, 2017
LEPOTA INC.
BALANCE SHEETS
ASSETS
July 31,
July 31,
Current Assets
Cash and cash equivalents
$ 7,781
$ 3,837
Total Current Assets
$ 7,781
$ 3,837
Total Assets
$ 7,781
$ 3,837
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current Liabilities
Loan from director
$ 5,475
$ 5,625
Checking/Savings account (overdraft)
-
-
Related party loans
4,210
4,210
Deferred Revenue
-
1,730
Total Liabilities
$ 9,685
$ 11,565
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $0.001; 75,000,000 shares authorized, 5,970,000 and 5,290,000 shares issued and outstanding respectively;
5,970
5,290
Stock Subscription Receivable
-
(500)
Additional Paid-in Capital
8,730
2,610
Accumulated deficit
(16,604)
(15,128)
Total Stockholders’ Equity
(1,904)
(7,728)
Total Liabilities and Stockholders’ Equity
$ 7,781
$ 3,837
See accompanying notes to financial statements.
LEPOTA INC.
STATEMENTS OF OPERATIONS
For the Year ended July 31, 2017
For the Year ended July 31, 2016
REVENUES (Consulting Services)
$ 5,730
$ 4,270
OPERATING EXPENSES
General and Administrative Expenses
7,206
5,625
TOTAL OPERATING EXPENSES
7,206
5,625
NET LOSS FROM OPERATIONS
(1,476)
(1,355)
PROVISION FOR INCOME TAXES
-
-
NET LOSS
$ (1,476)
$ (1,355)
NET LOSS PER SHARE: BASIC AND DILUTED
$ (0.00)
$ (0.00)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED
5,766,548
4,995,027
See accompanying notes to financial statements.
LEPOTA INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
See accompanying notes to financial statements.
LEPOTA INC.
STATEMENTS OF CASH FLOWS
For the Year ended July 31, 2017
For the Year ended July 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period
$ (1,476)
$ (1,355)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Changes in assets and liabilities:
Deferred Revenue
(1,730)
1,730
CASH FLOWS USED IN OPERATING ACTIVITIES
(3,206)
CASH FLOWS FROM FINANCING ACTIVITIES
Loans
$ (150)
$ 1,342
Bank overdraft
-
-
Capital Stock
6,800
2,900
Stock Subcription Receivable
(500)
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES
7,150
3,742
NET INCREASE IN CASH
$ 3,944
$ 4,117
Cash, beginning of period
3,837
(280)
Cash, end of period
$ 7,781
$ 3,837
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid
$
-
$ -
Income taxes paid
$
-
$ -
See accompanying notes to financial statements.
LEPOTA INC.
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2017 and 2016
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
Lepota Inc. (the "Company" or “Lepota”) was incorporated under the laws of the State of Nevada on December 9, 2013.
Our primary business is in the import of cosmetics into the Russian Federation and distribution of the products through shops and drugstores. We have concluded agreements with InterBeauty, LLC and South Distribution Company for distribution of the products. Company’s contact address is 5348 Vegas Dr. Las Vegas, NV 89108.
NOTE 2 - SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-10, “Development Stage Entities”. The amendments in this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder 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 in this update are applied retrospectively. The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements for the Company.
Basis of Presentation
The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. The Company has elected a July 31 fiscal year end.
Fair Value of Financial Instruments
In accordance with ASC 820, the Company’s financial instruments consist of cash and cash equivalents and amounts due to related parties. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Income Taxes
The Company accounts for income taxes under the asset/liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
In July 31, 2017, the FASB issued ASC 740, “Accounting for Uncertainty in Income Taxes”, which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. ASC 740 provides guidance
on the measurement, recognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. Under this pronouncement, the Company recognizes the financial statement benefit of a tax position only after determining that a position would more likely than not be sustained based upon its technical merit if challenged by the relevant taxing authority and taken by management to the court of the last resort. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon settlement with the relevant tax authority. ASC 740 became effective for the Company as of October 1, 2008 and had no material impact on the Company’s financial statements.
The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties on unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest and penalties since its inception.
Use of 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of July 31, 2017.
Comprehensive Income
The Company has which established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.
Recent Accounting Pronouncements
Lepota Inc. does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
The results for the three months ended July 31, 2017 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10K for the year ended July 31, 2016, filed with the Securities and Exchange Commission.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plans to obtain such resources for the Company include (1) obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses, and (2) seeking out and completing mergers with existing operating companies. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 - DIRECTOR’S LOAN
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
As of July 31, 2017, the Company had a loan outstanding with the Company’s sole director in the amount of $ 5,475. The loan is non-interest bearing, due upon demand and unsecured.
NOTE 5 - RELATED PARTY TRANSACTIONS
As of July 31, 2017 Company had loan outstanding with related parties in amount of $ 4,210.
NOTE 6 - COMMON STOCK
The Company has 75,000,000, $0.001 par value shares of common stock authorized.
The Company issued 5,000,000 common shares at par value of $0.001 to our director, IURII IURTAEV, for a total price of $5,000.
As of July 31, 2016 there were 240,000 shares of common stock issued at $0.01 per share for a total price of $2,400.
During the quarter ended January 31, 2017, the company issued 350,000 common shares at $0.01 for a total price of $3,500.
In February, the company issued 380,000 common shares at $0.01 per share for a total price of $3,800.
As of July 31, 2017, there were total of 5,970,000 shares of common stock issued and outstanding.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
The Company was not subject to any legal proceedings during the period from December 9, 2013 to July 31, 2017 and no proceedings are threatened or pending to the best of our knowledge and belief.
NOTE 8 - INCOME TAXES
As of July 31, 2017, the Company had net operating loss carry forwards of approximately $16,604 that may be available to reduce future years’ taxable income in varying amounts through 2032. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The provision for Federal income tax consists of the following:
July 31,
July 31,
Federal income tax benefit attributable to:
Current Operations
$ 502
$ 460
Less: valuation allowance
(502)
(460)
Net provision for Federal income taxes
$ 0
$ 0
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
July 31,
July 31,
Deferred tax asset attributable to:
Net operating loss carryover
$ 5,645
$ 5,143
Less: valuation allowance
(5,645)
(5,143)
Net deferred tax asset
$ 0
$ 0
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $16,604 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.
NOTE 10 - SUBSEQUENT EVENTS
In accordance with ASC 855-10 we have analyzed our operations subsequent to September 16, 2017 to the date that the financial statements were issued and have determined that we do not have any material subsequent events to disclose.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A(T).
Item 9A(T). Controls and Procedures
Management’s Report on Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of July 31, 2017 using the criteria established in “ Internal Control - Integrated Framework ” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of July 31, 2017, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
1.
We do not have an Audit Committee - While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities.
2.
We did not maintain appropriate cash controls - As of July 31, 2017, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company’s bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts.
3.
We did not implement appropriate information technology controls - As at July 31, 2017, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors.
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of July 31, 2017 based on criteria established in Internal Control-Integrated Framework issued by COSO.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of July 31, 2017, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons of the Company
DIRECTORS AND EXECUTIVE OFFICERS
The name, address and position of our present officers and directors are set forth below:
Name and Address
Age
Position(s)
Iurii Iurtaev
President,
Lelushenko 11, Unit 65
Chief Financial Officer,
Rostov-on-Don
Chief Executive Officer,
Russian Federation 344000
Sole Director
Rene Lawrence
Secretary
80 Whitmore Gardens
London NW105HJ
England, United Kingdom
Our Director Iurii Iurtaev:
Held his offices/positions since the inception of our Company and is expected to hold said offices/positions until the next annual meeting of our stockholders. The officers listed are our only officers and control persons.
BACKGROUND INFORMATION ABOUT OUR OFFICER AND DIRECTOR
Iurii Iurtaev
Education:
Higher, Don State Technical University
1993-1999 Faculty - Automation and informatics
Specialty - programmer
Work
( listed in inverse chronology):
1. 2012 up to now “YuDiCom” Ltd.
Capacity: Director in sales
1. Identification of needs of drogerie format networks.
2. Finding of products meeting the specified conditions at foreign market. (Search of company producing necessary products is carried out by means of visit to exhibitions and by internet)
3. Focus group realization. Determination of price model of selected products.
4. conducting of negotiations with producing company. Determination of the product positioning at Russian market and its price model.
5. Signing of contract at agreement of the price model and marketing from the both parties.
6. Coordination of the first supply (name, stickering, certificates, custom clearance, delivery). Control over the next supplies.
7. Position in Russia network. Control over brand manager work on the territory.
2. 2007-2012 “YuDiCom” LTD.
Capacity: Brand director in product promotion of “Kalina” and “Kalina Décor” concern. Numerous contracts were negotiated during the 2010-2012 time frame.
Obligations:
1. Interaction with supplier representative.
2. Control of work of trade representatives.
3. TT monitoring.
4. Planning of annual budget.
5. Development of new territories.
6. Debit indebtedness.
7. TT training
3. 2004-2007 “Crocus” Ltd.
Capacity: Trade representative of “YuDiCom” Ltd, “Kalina” division
Obligations: Promotion of “Kalina” concern products on the basis of
“YuDiCom” Ltd. Distributor
· Work at trade sites of retail and wholesale categories, control and making orders with customers, achievement of high-quality distribution, money collection, planning of working week schedule, making of plan of visiting, monitoring of territory, search of new customers.
· Since 2995 work with all key networks dedicated for “YuDiCom” Ltd. Entering alterations into specifications, conducting of negotiations with networks on matrix expansion, making of orders with goods managers and heads, goods layout, control of merchandiser, conducting of reconciliation acts, control over debit indebtedness.
· Since 2007 Deputy brand director of marketing department on promotion of “Kalina” concern products.
Additional obligations:
- Maintenance of internal accounts.
- Control and analysis of distribution level in TT.
- Customer base administration.
4. 2003-2004 “Advertising Space” Ltd.
Capacity: Advertising manager of “Advertising Space” Ltd.
Obligations: Finding of customers, development of advertising actions, solution of set tasks.
5. 2001-2003 “Metro” Ltd.
Capacity: Administrator of shops “Headgear” in “Metro” TC and “21 Century”
Obligations: Selection of shop assistants, purchase of equipment, selection of goods group, document execution, conducting of accounting, goods acceptance, payment to suppliers for sale.
6. 1998-2005 “Funky Bit” Ltd.
Capacity: Promoter (organization and control over performing artists)
Obligations: Organization of corporate parties, promotion actions, exhibitions, festivals, conducting of negotiations with customer, accompanying of promoting artists at shows, participation in show programs. I took part in organization of events of major Russian and international companies, in election campaigns of deputies and governors.
AUDIT COMMITTEE
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have no operations, at the present time, we believe the services of a financial expert are not warranted.
SIGNIFICANT EMPLOYEES
We have no employees other than our Treasurer and a sole director, Iurii Iurtaev; he currently devotes approximately twenty hours per week to company matters. We intend to hire employees on an as needed basis.
Item 11.
Item 11. Executive Compensation
The following tables set forth certain information about compensation paid, earned or accrued for services by our President, and Secretary and all other executive officers (collectively, the “Named Executive Officers”) from inception on December 9, 2013 until July 31, 2017.
SUMMARY COMPENSATION TABLE
Name and Principal Position
Year
Salary (US$)
Bonus (US$)
Stock Awards (US$)
Option Awards (US$)
Non-Equity Incentive Plan Compensation (US$)
Nonqualified Deferred Compensation Earnings (US$)
All Other Compensation (US$)
Total (US$)
Iurii Iurtaev
President, Treasurer, CEO, CFO
Rene Lawrence
Director, Secretary
There are no current employment agreements between the company and its sole officer. The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer. There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.
CHANGE OF CONTROL
As of July 31, 2017, we had no pension plans or compensatory plans or other arrangements that provide compensation in the event of a termination of employment or a change in our control.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table provides certain information regarding the ownership of our common stock, as of July 31, 2017 and as of the date of the filing of this annual report by:
•
each of our executive officers;
•
each director;
•
each person known to us to own more than 5% of our outstanding common stock; and
•
all of our executive officers and directors and as a group.
The percent of class is based on 5,970,000 shares of common stock issued and outstanding as of the date of this annual report.
Item 13.
Item 13. Certain Relationships and Related Transactions
During the year ended July 31, 2017, we had not entered into any transactions with our sole officer or director, or persons nominated for these positions, beneficial owners of 5% or more of our common stock, or family members of these persons wherein the amount involved in the transaction or a series of similar transactions exceeded the lesser of $120,000 or 1% of the average of our total assets for the last three fiscal years.
Item 14.
Item 14. Principal Accountant Fees and Services
During fiscal year ended July 31, 2017, we incurred approximately $7,000 in fees to our principal independent accountants for professional services rendered in connection with the audit of our financial statements and for the reviews of our financial statements for the quarters ended January 31, 2017, April 30, 2017, and October 31, 2016.
Item 15.
Item 15. Exhibits
The following exhibits are filed as part of this Annual Report.
Exhibits:
31.1
Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act
31.2
Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act
32.1
Certification of Chief Executive Officer and Chief Financial Officer Under Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LEPOTA INC.
Dated: December 8, 2017
By: /s/ Iurii Iurtaev
Iurii Iurtaev, President and
Chief Executive Officer and
Chief Financial Officer