Notes To Financial Statements
(Audited)
1
. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
Lifetech Industries, Inc. (LTCH) was incorporated in the State of Nevada on December 30, 2010 to develop a new day spa business in the affluent area of Montrose, California, surrounded by La Crescenta, La Canada, and Glendale. The Company is a development stage enterprise, as defined in FASB ASC 915 Development Stage Entities.
Our business is still in its early developmental and promotional stages and to date, our primary activities have involved significant re-structuring and re-organization. We have discontinued our planned spa development activities and adopted a new strategy to pursue opportunities in the air to water generator (AWG) industry.
On April 30, 2012, we entered into a Joint Venture Agreement, a Distribution Agreement, and a Technology License Agreement (the Agreements) with Leadwill Corporation, a Japanese corporation (the Manufacturer and the Licensor).
Pursuant to the Joint Venture Agreement, we acquired the global exclusive right (excluding Japan) to make, use, sell and otherwise distribute all of the Manufacturers AWG products and technologies. In addition, we have the exclusive right to assign, sublicense, or otherwise subcontract our distribution and marketing rights to third parties. We were also granted an exclusive license to any and all of the Manufacturers patents, trademarks, and all other intellectual property related to AWG products and have the exclusive right to assign, sublicense, or otherwise transfer these rights to third parties. We will receive the Manufacturers AWG products at the price of twelve percent (12%) above wholesale costs for such products.
Pursuant to the Distribution Agreement, we were appointed as the Manufacturers sole and exclusive Distributor. As such, we were given the exclusive right to: (1) market, promote, sell, and distribute all of the Manufacturers current and future AWG products and technology; and (2) assign, sublicense, or otherwise subcontract these distribution and marketing rights to third parties worldwide (excluding Japan). The Manufacturer will receive ten percent (10%) of the net profits generated from our distribution of the AWG technology, less related costs and expenses.
Pursuant to the Technology License Agreement, we were granted an exclusive, perpetual license to make, manufacture, use, sell or otherwise distribute all of the Licensors AWG related technology. We were also granted the right to sublicense these rights to third parties at our sole discretion. We will pay the Licensor a royalty equal to ten percent (10%) of the Net Sales Revenue received from our sales of the licensed technology on a quarterly basis.
Upon execution of the Agreements, Leadwill Corporation has agreed to (A) file all necessary doing business as (d/b/a) documents in Japan so that Leadwill shall d/b/a Lifetech Japan, (B) change its corporate name from Leadwill Corporation to Lifetech Japan, or (C) transfer or spinoff all and not less than all of its AWG business into a new, separate corporate entity in Japan, to be called Lifetech Japan. All of our rights set forth in the Agreements shall apply equally to the new, separate corporate entity.
On September 1, 2012, we entered into a Joint Venture Agreement, a Distribution Agreement, and a Technology License Agreement (the New Agreements) with Lifetech Japan Corporation (the New Manufacturer), a Japanese corporation. The New Agreements were executed pursuant to the transfer of the AWG business from Leadwill to Lifetech Japan. Under the New Agreements, all of our rights to Lifetech Japans AWG products and technologies remain the same.
As a part of the Agreements, we entered into a share swap with the Manufacturer where we will receive 20% of all voting shares of the Manufacturer and the Manufacturer will receive 10% of all voting shares of our Company. We will account for its investment in the Manufacturer under the equity method accounting for investments. As of April 30, 2013, no official share swap has taken place.
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LIFETECH INDUSTRIES, INC.
(A Development Stage Company)
Notes To Financial Statements
(Audited)
1.
BUSINESS DESCRIPTION AND BASIS OF PRESENTATION (CONT.)
The term of the New Agreements are for 10 years and shall automatically renew for 10 years unless both parties mutually agree not to renew 90 days before the end of the term.Effective December 2012 LifeTech Industries Inc. has signed an exclusive ten-country distribution agreement with SunPlex Limited.
The Company sells its products to wholesale distributors and directly to medical facilities, government agencies and schools.
The distribution plan involves three phases.
Revenue is recognized when evidence of an arrangement exists, pricing is fixed and determinable, collection is reasonably assured, and shipment has occurred. Payment is due on a net basis in 60 days. If the customer is deemed not credit worthy, payment in advance is required. Payments received in advance of when revenue is recognized are recorded as deferred revenue on the balance sheets and recognized as revenue when the goods are shipped and all other general revenue recognition criteria have been met. No revenue was realized till date.
The Lifetech AirWell System is a highly advanced air to water generator that produces high quality water by promoting and filtering the condensation of moisture from air. The Air Well System uses an advance triple step gathering system and 12-step purification process to produce water that is free of chemicals, pollutants, contaminants and hormones.v
Our manufacturer currently produces a home/office unit which generates approximately 30 liters of water per day. However, our air to water generation and filtration technology is scalable and we are currently in the process of developing customizable units to service the water needs of a variety of industries such as:
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Shipping and boating
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Hotels and resorts
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Hospitals and schools
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Mining and drilling
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Government and military
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Spas and well-being facilities
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Humanitarian organizations
Our air to water generation and filtration technology is currently patented in Taiwan and Japan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Companys accounting policies used in the preparation of the accompanying financial statements conform to accounting principles generally accepted in the United States of America ("US GAAP") and have been consistently applied.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates
F-7
LIFETECH INDUSTRIES, INC.
(A Development Stage Company)
Notes To Financial Statements
(Audited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONT.)
include: revenue recognition; sales returns and other allowances; allowance for doubtful accounts; valuation of inventory; valuation and recoverability of long-lived assets; property and equipment; contingencies; and income taxes.
On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Development Stage Company
The Company is a development stage company as defined in FASB ASC 915 Development Stage Entities. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception has been considered as part of the Companys development stage activities.
Cash and cash equivalents
The Company includes in cash and cash equivalents all short-term, highly liquid investments that mature within three months of their acquisition date. Cash equivalents consist principally of investments in interest-bearing demand deposit accounts and liquidity funds with financial institutions and are stated at cost, which approximates fair value. For cash management purposes the company concentrates its cash holdings in an account at JP Morgan Chase Bank.
Foreign currency translation
The Companys functional currency and its reporting currency is the United States Dollar.
Financial Instruments
Fair Value of Financial Instruments
The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.
As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on 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 require the reporting entity to develop its own assumptions.
The three levels of the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
F-8
LIFETECH INDUSTRIES, INC.
(A Development Stage Company)
Notes To Financial Statements
(Audited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
Website development costs
Under the provisions of FASB-ASC Topic 350, the Company previously capitalized costs of design, configuration, coding, installation, and testing of the Companys website up to its initial implementation. Costs will be amortized
to expense over an estimated useful life of three years using the straight-line method. Ongoing website post-
implementation cost of operations, including training and application, are expensed as incurred. The Company evaluates the recoverability of website development costs in accordance with FASB-ASC Topic 350. As of the year ended April 30, 2013, management does not believe that there is a need for the impairment of costs incurred toward the development of its website.
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April
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2013
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2012
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Website development cost
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$ 15,522
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$ 2,922
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Accumulated amortization
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(2,156)
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-
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Total intangible assets
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$ 13,366
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$ 2,922
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Income Taxes
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
Basic and Diluted Loss per Share
The Company follows ASC Topic 260 to account for earnings per share. Basic earnings per share (EPS) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Revenue recognition
Our revenue recognition policy is in accordance with generally accepted accounting principles, which requires the recognition of sales when there is evidence of a sales agreement, the delivery of goods has occurred, the sales price is fixed or determinable and the collectability of revenue is reasonably assured.
In May 2012, we signed an agreement with Epik Investments Limited, a Limited Liability Corporation incorporated under the laws of the Hong Kong Special Administrative Region, assigning them the exclusive rights to sell and distribute all of our products in Hong Kong and the Peoples Republic of China. These exclusive distribution rights are for a period of 2 years.
F-9
LIFETECH INDUSTRIES, INC.
(A Development Stage Company)
Notes To Financial Statements
(Audited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONT.)
We received consideration of $100,000 under the terms of the agreement. For the year ended April 30, 2013, we earned a total of $50,000 in revenue and as of April 30, 2013 accrued deferred revenue of $50,000 related to this agreement
.
Effective December 2012 LifeTech Industries Inc. has signed an exclusive ten-country distribution agreement with SunPlex Limited. LifeTech and SunPlex have agreed to a 5 year distribution plan which involves three phases. The first phase is to obtain government approvals and endorsements for Airwell products. The second phase of SunPlex's plan is to distribute Airwell products to hospitals, schools and government offices throughout the designated countries in Africa, and work with government agencies to set up water depots in areas where accessing clean and fresh water is extremely difficult. The final phase of SunPlex's proposal aims to partner with commercial and residential developers-incorporating the Airwell machines in their developmental plans-to which early discussions have suggested strong interest.
Under the terms of the agreement, the project has the potential to bring sales of up to $75 Million or more over the course of 5 years. As of April 30, 2013 no revenue has been realized from the said distribution agreement.
Revenue is recognized when evidence of an arrangement exists, pricing is fixed and determinable, collection is reasonably assured, and shipment has occurred. Payment is due on a net basis in 60 days. If the customer is deemed not credit worthy, payment in advance is required. Payments received in advance of when revenue is recognized are recorded as deferred revenue on the balance sheets and recognized as revenue when the goods are shipped and all other general revenue recognition criteria have been met.
Recent accounting pronouncements
The Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations, or cash flows of the Company.
3. GOING CONCERN
As of April 30, 2013, our company has accumulated losses of $260,087 since inception. Our company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending April 30, 2014. In response to these problems, management intends to raise additional funds through public or private placement offerings. These factors, among others, raise substantial doubt about our companys ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
4. COMMON STOCK
The authorized capital of the Company is 200,000,000 common shares with a par value of $0.0001 per share. On July 13, 2011, the Company authorized the issuance of 25,000,000 shares of common stock at $0.001 per share to Benjamin Chung, the former CEO. The Company relied on Section 4(2) of the Securities Act for this issuance.
F-10
LIFETECH INDUSTRIES, INC.
(A Development Stage Company)
Notes To Financial Statements
(Audited)
4. COMMON STOCK
(CONT.)
In January 2011, the Officer of the Company contributed an amount of $100 for stock which had not yet been issued. This amount was classified as Stock Payable on the balance sheet. On July 13, 2011, when 25,000,000 shares of common stock were issued, this amount was reclassified to additional paid in capital.
On July 13, 2011, the Company issued 25,000,000 shares of common stock at $0.001 per share to Benjamin Chung, the former CEO for services of $5,000 and for cash of $20,000. The Company relied on Section 4(2) of the Securities Act for this issuance.
During the period between January 2011 and February 2011, the Company issued 25,000,000 shares of common stock under private placement agreements to various investors at $0.001 per share. The Company received a total of $24,900, net of proceeds.
As of April 30, 2013, 50,000,000 common shares are issued & outstanding.
5. RELATED PARTY TRANSACTIONS
As of April 30, 2013 and 2012, our Company was obligated to Benjamin Chung for an unsecured and non-interest bearing demand loan with a balance of $172,678 and $108,933, respectively.
On July 13, 2011, the Officer of the Company contributed an amount of $100 towards additional paid in capital.
6. INCOME TAXES
From the Companys inception (December 31, 2010) through the year ended April 30, 2013, the Company incurred net operating losses and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. As of April 30, 2013 and 2012, the Company had approximately $260,087 and $153,291 of federal and state operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.
The components of the Companys deferred tax asset are as follows:
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April
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2013
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2012
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Deferred tax assets:
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Net operating loss carry forwards
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91,030
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53,652
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Valuation allowance
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(91,030)
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(53,652)
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Total deferred tax assets
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$ -
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$ -
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The valuation allowance for deferred tax assets as of April 30, 2013 and 2012 was $91,030 and $53,652, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of April 30, 2013 and 2012, and recorded a full valuation allowance.
F-11
LIFETECH INDUSTRIES, INC.
(A Development Stage Company)
Notes To Financial Statements
(Audited)
6. INCOME TAXES (CONT.)
Reconciliation between the statutory rate and the effective tax rate is as follows at April 30:
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2013 & 2012
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Federal statutory tax rate
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(35.0)%
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Permanent difference and other
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35.0%
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7. SUBSEQUENT EVENTS
On May 23, 2013, the Company received a resignation notice from Benjamin Chung from all of his positions with the Company, including President, CEO, Principal Executive Officer, CFO, Principal Accounting Officer, Secretary, Treasurer and as Director.
On May 23, 2013, the Company appointed Paul Rosenberg as its new President, CEO, Principal Executive Officer, CFO, Principal Accounting Officer, Secretary, Treasurer and as Director.
Mr. Rosenberg will serve as our Director and Officer until his duly elected successor is appointed or he resigns. There are no arrangements or understandings between Mr. Rosenberg and any other person pursuant to which he was selected as an officer and director. There are no family relationship between Mr. Rosenberg and any of our officers or directors. Mr. Rosenberg has not held any other directorships in a company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.
F-12