Notes to Condensed Financial Statements
For the period ending June 30, 2016
(Unaudited)
NOTE 1. NATURE OF BUSINESS
ORGANIZATION
Advanced Environmental Petroleum Producers Inc., f/k/a Electric Vehicle Research Corporation (hereinafter "AEPP") is a company incorporated in the State of Florida in June 2013. We were formed as a consultant to the electric vehicle research and technologies industry. The electric vehicle research and technologies industry is subject to constant change due to market trends, thereby making it extremely competitive. The electric vehicle research and technologies industry is complex, because several segments are regulated by both federal and state governments. AEPP's approach assists general business operations with the growth and development, international expansion and marketing aspects of their business, allowing our potential customers to focus on the business aspects of operations. By using the services provided by AEPP, our clients are free to focus on compliance with regulations within their industry, and to complete their primary business goals.
NOTE 2. 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 cost 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 plan to obtain such resources for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. 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 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM FINANICAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles, for complete financial statements please refer to our 2015 Annual Report on Form 10-K, filed on April 14, 2016.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.
ADVANCED ENVIRONMENTAL PETROLEUM PRODUCERS INC.
Notes to Condensed Financial Statements
For the period ending June 30, 2016
(Unaudited)
USE OF ESTIMATES
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which require 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents totaled $0 at June 30, 2016 and $0 at December 31, 2015.
CASH FLOWS REPORTING
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method ("Indirect method") as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
FINANCIAL INSTRUMENTS
The Company's balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
ASC 820,
Fair Value Measurements and Disclosures
, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). 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 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
·
|
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
|
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2016 and December 31, 2015. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
ADVANCED ENVIRONMENTAL PETROLEUM PRODUCERS INC.
Notes to Condensed Financial Statements
For the period ending June 30, 2016
(Unaudited)
INTANGIBLE ASSETS
The Company is in the process of applying for patent protection for its products and technologies. The Company has applied the provision of ASC topic 350 – Intangible – goodwill and other, in accounting for its intangible assets. Due to the early stages of the process the Company has not capitalized the full cost of the provisional patent application process. Therefore, Intangible assets are currently not being amortized. As of June 30, 2016 and December 31, 2015 Intangible assets totaled $3,502 and $3,502, respectively.
REVENUE RECOGNITION
The Company follows ASC 605,
Revenue Recognition
. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company derives revenue from consulting arrangements with clients. Revenue is generated by hourly fee structure or fixed contract costs, based on expected time to complete, additionally, costs incurred may be billed, as defined by the contractual arrangements.
RESEARCH AND DEVELOPMENT
The Company expenses research and development costs when incurred. Research and development costs include engineering and testing of product and outputs. Indirect costs related to research and developments are allocated based on percentage usage to the research and development. We spent $0 and $59 in research and development costs for the three months ended June 30, 2016 and 2015, respectively and $0 and $2,969 in research and development costs for the six months ended June 30, 2016 and 2015, respectively.
DEFERRED INCOME TAXES AND VALUATION ALLOWANCE
The Company accounts for income taxes under ASC 740,
Income Taxes
. 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. 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. No deferred tax assets or liabilities were recognized as of June 30, 2016 or December 31, 2015.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share is calculated in accordance with ASC 260, "Earnings Per Share." The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at June 30, 2016 and December 31, 2015. As of June 30, 2016, the Company had no dilutive potential common shares.
ADVANCED ENVIRONMENTAL PETROLEUM PRODUCERS INC.
Notes to Condensed Financial Statements
For the period ending June 30, 2016
(Unaudited)
RECENT ACCOUNTING PRONOUNCEMENTS
Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the
FASB Accounting Standards Codification™
("ASC") is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company's present or future financial statements.
We have reviewed the FASB issued Accounting Standard Update ("ASU 2014-10") and have applied the standard as of the dates during the periods reported.
We have reviewed the FASB issued Accounting Standard Update ("ASU 2014-09"). The Company does not believe that the new or modified principal will not have a material effect on these financial statements.
We have reviewed the FASB issued Accounting Standards Update ("ASU") accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
NOTE 4. INCOME TAXES
At June 30, 2016, the Company had a net operating loss carry–forward for Federal income tax purposes of $603,039 that may be offset against future taxable income through 2033. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company's net deferred tax assets of approximately $227,000, calculated at an effective tax rate of 34%, federal and 3.6% state, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by the valuation allowance of $227,000.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.
The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the period from inception ended December 31, 2013 through the year ended December 31, 2015. The Company recognizes interest and penalties related to income taxes in income tax expense. The Company had incurred no penalties and interest for the period from inception ended December 31, 2013 through the year ended December 31, 2015. The open tax years are 2013, 2014 and 2015.
NOTE 5. SHAREHOLDERS' EQUITY
The Company, through approval of its Board of Directors, authorized common shares of 500,000,000 with a par value of $0.0001.
On September 10, 2015, the majority shareholders of the Company approved a reverse stock split of one for 1,000 (1:1000) of the Company's total issued and outstanding shares of common stock. Pursuant to the Company's Bylaws and the Florida Division of Corporations, a vote by the holders of at least a majority of the Company's outstanding votes is required to affect the Stock Split. The Company's articles of incorporation do not authorize cumulative voting. As of the record date of September 10, 2015, the Company had 31,635,598 voting shares of common stock issued and outstanding. The consenting stockholders of the shares of common stock are entitled to 30,000,000 votes, which represents approximately 99% of the voting rights associated with the Company's shares of common stock. The consenting stockholders voted in favor of the Stock Split by unanimous written consent dated September 10, 2015.
On October 9, 2015 FINRA approved the stock split to be effective October 13, 2015 and filed with the Securities and Exchange Commission on October 16, 2015.
ADVANCED ENVIRONMENTAL PETROLEUM PRODUCERS INC.
Notes to Condensed Financial Statements
For the period ending June 30, 2016
(Unaudited)
COMMON STOCK
On January 6, 2016 the Company issued 30,000 shares of common stock to non-related parties in exchange for the extinguishment of $4,000 of accounts payable. The shares were issued at $0.005 per share.
On February 11, 2016 the Company issued 4,920,000 shares of common stock to non-related parties. The shares were issued and are being held in escrow in addition to the shares issued as a part of the Share Purchase Agreement dated October 24, 2015. The shares were issued at $0.005 per share.
During the period ending June 30, 2016 the Company issued 7,500,000 shares of common stock to several non-related parties in exchange for the extinguishment of $37,500 of notes payable. The shares were issued at $0.005 per share.
There were 92,781,633 shares of common stock issued and outstanding at June 30, 2016 and 80,331,633 shares of common stock issued and outstanding at December 31, 2015.
All issued and outstanding shares and per share prices are reflective of the one to one thousand (1:1,000) revere split effective October 13, 2015.
NOTE 6. NOTES PAYABLE
Notes payable consisted of the following:
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
New Opportunity Business Solutions, Inc., a non-related party for consulting services to the Company. Advanced Environmental Petroleum Producers Inc. (AEPP) is a client of New Opportunity Business Solutions, Inc. The original amount of the note payable was $199,800. The note states a 10% interest rate with no set maturity date and is due on demand. Payment of principal and interest is due on demand and is not contingent. However, to the extent that the Company incurs expense to accomplish the goal of the consulting agreement, the obligation of the company shall be reduced an equal amount. The note is as support for the consulting fee which was owed by AEPP but not paid as required. The loan is in default. Accrued interest at June 30, 2016 and December 31, 2015 was $56,547 and $50,324, respectively.
|
|
$
|
88,800
|
|
|
$
|
126,300
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
88,800
|
|
|
$
|
126,300
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
88,800
|
|
|
$
|
126,300
|
|
ADVANCED ENVIRONMENTAL PETROLEUM PRODUCERS INC.
Notes to Condensed Financial Statements
For the period ending June 30, 2016
(Unaudited)
NOTE 7. COMMITMENTS AND CONTINGENCIES
On October 24, 2015, the Company announced that it had entered into an agreement to acquire 100% of the issued and outstanding shares of 1923285 Alberta Ltd. ("Alberta") for 65,600,000 shares of the Company's common stock. Both the Company's 65,600,000 and 100% of the issued and outstanding Alberta Shares will be held in escrow until Alberta provides the Company with firstly, required audited financial statements, secondly, a certificate that the leases held by Alberta from Peru Petro (an entity owned by the Government of Peru) are unencumbered and are in good standing. It is anticipated that the audited financial statements and the report confirming the reserves and the potential reserves was to be completed before December 31, 2015 however due to unforeseen circumstances has been delayed but is still pending.
Alberta was incorporated in 2015 in the province of Alberta. Alberta has ownership interests in a lease that encompasses 10,100 square Kilometers of oil and gas and mineral leases in the country of Peru known as "Block 19".
From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company's financial position or results of operations.
NOTE 8. WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of common stock of the Company as of June 30, 2016.
NOTE 9. SUBSEQUENT EVENTS
On July 6, 2016 the Company announced it had acquired the Technical Evaluation Agreement from 1923285 Alberta Ltd. resulting in the shares held in escrow to be released
On July 8, 2016 issued 1,600,000 shares of common stock to a non-related parties in exchange for the extinguishment of $8,000 of notes payable. The shares were issued at $0.005 per share.
On July 16, 2016, the Company announced that it has entered into a verbal final agreement to retire all of the outstanding past due liabilities as stated on the 10Q filed with the Securities and Exchange Commission dated May 20, 2016. Per the terms of the agreement there will be 4,920,000 common shares cancelled from the shares issued in escrow in October 2015 and the new issuance of 4,450,000 common shares resulting in a reduction of 470,000 current issued and outstanding common shares. This agreement brings the total issued and outstanding to 93,911,633 of which 28,311,633 are considered issued without restriction due to rule 144 exemption.