NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2017
NOTE 1
ORGANIZATION AND BASIS OF PREPARATION
Quest Management Inc. (the “Company”) is a for profit corporation established under the corporate laws of the State of Nevada on October 12, 2014 for the purpose of the development of marketing channels to distribute fitness equipment to the wholesale market in the US.
The Company has a year end of October 31st.
The Company is a development stage company as defined by the Financial Accounting Standards Board's Accounting Standards Codification Topic 915 related to Development Stage Entities. The Company qualifies as a development stage company as it has not generated significant revenues from operations.
NOTE 2
SIGNIFICANT ACCOUNT POLICIES
2.1 Interim Financial Statements
The accompanying unaudited financial statements have been prepared in accordance with the instructions from Regulation S-X and do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim period(s), and to make the financial statements not misleading, have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim period(s) are not necessarily indicative of operations for a full year.
2.2 Use of Estimates and Assumptions
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 period. Actual results could differ from those estimates.
Due to the limited level of operations, the Company has not had to make material assumptions or estimates other than the assumption that the Company is a going concern.
2.3 Fair Value of Financial Instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of January 31, 2017
The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts payable and related party loan payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value.
2.4 Cash & Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
2.5 Revenue Recognition
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred, the price is fixed or determinable, and collection of any resulting receivable is reasonably assured. Costs and expenses are recognized during the period in which they are incurred. Any revenues earned include sales of our exercise equipment. The Company recognizes these sales once delivery time is confirmed by the customer.
2.6 Cost of Sales
Amounts that will be recorded as cost of sales relate to direct expenses incurred in order to fulfill orders of our products. Such costs are recorded and allocated as incurred. Our cost of sales will consist primarily of the cost of product, packaging/labeling costs and shipping expenses.
2.7 Basic and Diluted Loss Per Share
The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. The Company has no potential dilutive instruments, and therefore, basic and diluted earnings (loss) per share are equal.
2.8 Income Taxes
The Company follows the guidance of the Financial Accounting Standards Board's Accounting Standards Codification Topic 740 related to Income Taxes. According to Topic 740, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year-end.
For federal income tax purposes, substantially all expenses incurred prior to the commencement of operations must be deferred and then they may be written off over a 180-month period. Tax deductible losses can be carried forward for 20 years until utilized for federal tax purposes. The Company will provide a valuation allowance in the full amount of the deferred tax assets since there is no assurance of future taxable income.
The Company utilizes the Financial Accounting Standards Board's Accounting Standards Codification Topic 740 related to Income Taxes to account for the uncertainty in income taxes. Topic 740 for Income Taxes clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition, measurement and classification in financial statements of tax positions taken or expected to be in a tax return. Further, it prescribes a two-step process for the financial statement measurement and recognition of a tax position. The first step involves the determination of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination, based on the technical merits of the position. The second step requires that any tax position that meets the more likely than not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is a greater than 50 percent likelihood of being realized upon ultimate settlement. This topic also provides guidance on the accounting for related interest and penalties, financial statement classification and disclosure. The Company's policy is that any interest or penalties related to uncertain tax positions are recognized in income tax expense when incurred. The Company has no uncertain tax positions or related interest or penalties requiring accrual at January 31, 2017.
NOTE 3 RECENT ACCOUNTING PRONOUNCEMENT
The Company has adopted all recent accounting pronouncements as applicable and will continue to review and adopt those applicable as released within the timeframe required.
NOTE 4 CONCENTRATIONS
Initial sales are concentrated with one client. Sales are made without collateral, and the credit-related losses are insignificant or non-existent. Accordingly, there is no provision made to include an allowance for doubtful accounts.
NOTE 5 FIXED ASSETS
Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs, if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any subsidy/reimbursement/contribution received for installation and acquisition of any fixed assets is shown as deduction in the year of receipt. Capital work- in progress is stated at cost.
Subsequent expenditure related to an item of fixed assets is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repairs and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets derecognized.
We purchased our principal executive offices at 1 Kalnu iela, Malta, LV-4630 Latvia, on October 30, 2014 for $7,915.
The Company depreciates its property using straight-line depreciation over the estimated useful life of 40 years.
For the three months ended January 31, 2017 the company recorded $49 in depreciation expense. From inception (October 12, 2014) through January 31, 2017 the company has recorded a total of $445 in depreciation expense.
NOTE 6 LOAN PAYABLE - RELATED PARTY
The Director and President of the Company has loaned the company for operations from time to time on need basis. The balance as of October 31, 2016 of $4,066 is being carried as a loan payable. The loan is non-interest bearing, unsecured and payable upon demand.
NOTE 7 PROMISSORY NOTE PAYABLE
During the quarter ended January 31, 2017, the Company issued a Convertible Promissory Note in the principal amount of $16,605 to Peak Marine Holdings LLC, a Florida limited liability company (“Peak”). This Convertible Promissory Note (the “Note”) was issued in consideration of advances and loans made by Peak to the Company.
Pursuant to the terms of the Note, the holder has the right to convert any portion of the principal amount thereof at the par value of the Company’s common stock. The holder also has the right to assign any portion of the Note, or assign the shares to be issued upon any conversion of the Notes, to other parties. During the month of December 2016, Peak sold all its interest in the Note to five (5) independent third parties (the “Holders”).
During the month of January 2017, the Holders provided notices of election to convert a total of $15,000 of the Note into shares, which totaled 15,000,000 shares of common stock.
NOTE 8 COMMON STOCK AND ISSUANCE
The Company has authorized 750,000,000 common shares at $0.001 par value, of which 70,000,000 shares are issued and outstanding as of January 31, 2017.
4,000,000 shares were issued to our sole director for $4,000 on October 17, 2014.
The Company’s Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission to register 2,000,000 shares of common stock was declared effective on February 25, 2015. During March 2015 the company sold a total of 1,000,000 shares of common stock to 30 independent shareholders, pursuant to the Registration Statement, at a price of $.04 per share for total proceeds of $40,000.
On February 2, 2016, Quest Management Inc. (the "Company") filed Articles of Amendment with the Nevada SOS whereby it authorized a forward split at a ratio of ten-for-one share (10:1) of the Company's issued and outstanding shares of Common Stock. The Company also increased the authorized number of shares of Common Stock from 75,000,000 shares to 750,000,000 at a par value of $0.001.
On February 10, 2016, the Company filed an Issuer Company-Related Action Notification Form with FINRA requesting the forward split at a ratio of ten-for-one share be effected in the market on February 22, 2016.
During the month of January 2017, the Holders of a Promissory Note (see Note 7) provided notices of election to convert a total of $15,000 of the Note into shares, which totaled 15,000,000 shares.
NOTE 9 INCOME TAXES
We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. 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 the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
There was no income tax expense for the years ended October 31, 2016 and 2015. The rate was as follow;
Federal
|
|
|
35
|
%
|
State
|
|
|
5
|
%
|
|
|
|
39
|
%
|
The significant components of deferred tax assets and liabilities are as follows:
|
|
OCTOBER 31,
|
|
|
OCTOBER 31,
|
|
|
FROM INCEPTION (OCTOBER 12, 2014) TO OCTOBER 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
(2,401
|
)
|
|
$
|
(50,941
|
)
|
|
$
|
(45,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
936
|
|
|
$
|
19,867
|
|
|
$
|
17,646
|
|
Less valuation allowance
|
|
$
|
(936
|
)
|
|
$
|
(19,867
|
)
|
|
$
|
(17,646
|
)
|
Deferred tax asset - net valuation allowance
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 10 RELATED PARTY TRANSACTIONS
On October 17, 2014, 4,000,000 shares of the Company’s common stock were issued to our sole director for $4,000.
The Director and President of the Company has loaned the company operating funds from time to time. The balance as of January 31, 2017 of $4,066 is being carried as a loan payable. The loan is non-interest bearing, unsecured and payable upon demand.
The Company's sole officer and director is involved in other business activities and may in the future, become involved in other business opportunities as they become available.
NOTE 11 LEGAL MATTERS
The Company has no known legal issues pending.
NOTE 12 GOING CONCERN
The accompanying financial statements and notes have been prepared assuming that the Company will continue as a going concern.
The Company had limited operations during the period from October 12, 2014 (date of inception) to January 31, 2017 with a net loss of $57,069. There is no guarantee that the Company will continue to generate revenues. This condition raises substantial doubt about the Company’s ability to continue as a going concern. The Company is currently in the development stage. Management believes that the Company’s current cash of $133 and anticipated revenues may not be sufficient to cover the expenses they will incur during the next twelve months.
Management has funded operations of the Company through the proceeds from its offering pursuant to a Registration Statement on Form S-1, private placements of restricted securities or the issuance of stock in lieu of cash for payment of services until such a time as profitable operations are achieved. There are no written agreements in place for such funding or issuance of securities and there can be no assurance that such will be available in the future. Management believes that this plan provides an opportunity for the Company to continue as a going concern.
The failure to achieve the necessary levels of profitability or obtaining additional funding would be detrimental to the Company.
NOTE 13 SUBSEQUENT EVENTS
The Company has evaluated events subsequent through the date these financial statements have been issued to assess the need for potential recognition or disclosure in this report. Such events were evaluated through the date these financial statements were available to be issued. Based upon this evaluation, it was determined that no subsequent events occurred that require recognition or disclosure in the financial statements.