Notes to Consolidated Financial Statements
December 31, 2016 and 2015
NOTE A – ORGANIZATION AND NATURE OF BUSINESS
Judo Capital Corp. was incorporated
in the State of Delaware on November 16, 2005 under the name Blue Ribbon Pyrocool, Inc. (“Blue Ribbon”). Blue Ribbon
changed its name to Classic Rules Judo Championships, Inc. ("Classic Rules") on July 15, 2008 then to Judo Capital Corp
on February 15, 2017. Classic Rules formed a subsidiary in the State of Connecticut on August 13, 2008 named Classic Rules World
Judo Championships, Inc. to develop an annual judo championship tournament. Collectively the entities are referred to as “the
Company”. On June 2, 2014, the Company ceased its principal activities of hosting and sponsoring judo tournaments. The Company
plans to operate in real estate investment activities focused in the New York City metropolitan area.
NOTE B – GOING CONCERN
The accompanying financial statements
have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has no revenues, has incurred net losses of $29,482 and
$6,696 for the years ended December 31, 2016 and 2015, has an accumulated deficit of $347,915 and $318,433 at December 31, 2016
and 2015, and has experienced negative cash flows from operations. These circumstances raise substantial doubt about the Company’s
ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Management plans to enter to real estate
market and has signed an agreement to raise capital to do so. However, the Company needs to raise additional capital in order to
fully develop its business plan. Failure to raise adequate capital and generate adequate sales revenues could result in the Company
having to curtail or cease operations. Additionally, even if the Company does raise sufficient capital to support its operating
expenses and generate adequate revenues, there can be no assurance that the revenue will be sufficient to enable it to develop
business to a level where it will generate profits and cash flows from operations.
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements
include the accounts of Classic Rules Judo Championships, Inc. and its wholly owned subsidiary Classic Rules World Judo Championships,
Inc. All inter-company balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that effect 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 revenue 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
a maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents at December
31, 2016 and 2015.
F-6
Judo Capital Corp.
Formerly Classic Rules Judo Championships,
Inc.
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Fair Value of Financial Instruments:
Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic No. 825, “Financial Instruments” (“Topic
No. 825”) requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and
not recognized on the balance sheet, for which it is practicable to estimate fair value. Topic No. 825 defines fair value of a
financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.
At December 31, 2016 and 2015 the carrying value of the Company’s cash, accounts payable and accrued liabilities and related
party payables approximate fair value due to the short-term nature of these financial instruments.
Equity-Based Compensation
The Company accounts for equity-based
compensation transactions with employees under the provisions of FASB ASC Topic No. 718, “Compensation, Stock Compensation”
(“Topic No. 718”). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net earnings.
The fair value of common stock issued for compensation is measured at the market price on the date of grant. The fair value of
the Company’s equity instruments, other than common stock, is estimated using a Black-Scholes option valuation model. This
model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated
life of each award. In addition, the calculation of equity-based compensation costs requires that we estimate the number of awards
that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized
over the vesting period of the award and the Company elects to use the straight-line method for awards granted after adoption of
Topic No. 718.
The Company accounts for equity-based
transactions with non-employees under provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees”
(“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall
be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more
reliably measurable. The fair value of common stock issued for payments to non-employees is measured at the market price on the
date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation
model. In general, the Company recognizes an asset or expense in the same manner as if it was to pay cash for the goods
or services instead of paying with or using the equity instrument.
F-7
Judo Capital Corp.
Formerly Classic Rules Judo Championships,
Inc.
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
The Company accounts for income taxes
in accordance with FASB ASC Topic No. 740, Income Taxes (“Topic No. 740”) which requires the use of the liability method
of accounting for income taxes. The liability method measures deferred income taxes by applying enacted statutory rates in effect
at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the
financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur.
A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. At December 31,
2016 and 2015, the entire deferred tax asset, which arises from our net operating losses, has been fully reserved because management
has determined that it is not more likely than not that the net operating loss carry forwards will be realized in the future.
The Company recognizes and measures
uncertain tax positions and records tax benefits when it is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements
from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon
ultimate settlement. The Company recognizes interest and penalties as a component of income tax expense. At December 31, 2016 and
2015 the Company did not have any unrecognized tax benefits and has not accrued any liability for the payment of tax related interest
or penalties. The Company currently has no federal or state tax examinations in progress nor has it had any federal or state tax
examinations since inception.
Subsequent Events
In accordance with Topic No. 855 “Subsequent
Events” the Company evaluated subsequent events, which are events or transactions that occurred after December 31, 2016 through
the date of the issuance of the accompanying consolidated financial statements.
Recently Issued Accounting Pronouncements
Management does not believe that any
recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying consolidated
financial statements.
Advertising Costs
The Company's policy regarding advertising is to expense
advertising when incurred.
Net Loss Per Common Share
The Company computes basic loss per
common share by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock
outstanding for the period. Diluted loss per share is computed using the weighted average number of shares of common stock and
dilutive common equivalent shares outstanding during the year. Common equivalent shares from stock options and other common stock
equivalents are excluded from the computation when their effect is anti-dilutive. The Company was in a loss position for all periods
presented and, accordingly, there is no difference between basic loss per share and diluted loss per share.
Related parties
The Company follows ASC 850, “Related
Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Reclassification
Certain prior year amounts have been reclassified to conform
with the current year presentation.
NOTE D – STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company is authorized to issue 50,000,000 shares of preferred
stock with a par value of $0.001 per share.
F-8
Judo Capital Corp.
Formerly Classic Rules Judo Championships,
Inc.
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
NOTE D – STOCKHOLDERS’ DEFICIT (CONTINUED)
Preferred Stock (continued)
On June 3, 2015, the Company accepted the conversion of all
outstanding shares of Series A Preferred Stock and issued 200,000 shares of common stock in exchange for 500,000 shares of Series
A Preferred Stock.
There was 0 shares of Series A Preferred Stock issued and
outstanding at December 31, 2016 and 2015.
Common Stock
The Company is authorized to issue up
to 100,000,000 shares of common stock with a par value of $0.001 per share.
On June 3, 2015, the Company accepted
the conversion of all outstanding shares of Series A Preferred Stock and issued 200,000 shares of common stock in exchange for
500,000 shares of Series A Preferred Stock.
On October 15, 2015, the Company issued
50,000,000 shares of common stock Gladstone Ventures, LLC which the Company’s CEO is a Managing Member, for cash proceeds
of $30,000 and a subscription receivable of $30,000, which was subsequently collected on October 4, 2016.
In November 2015, certain shareholders
of the Company expressed dissatisfaction. While no legal action was taken by the shareholders, the Company deemed it was in
its best interest to settle with the shareholders by issuing a total of 165,480 shares of common stock. The common stock issuance
was treated as an equity financing activity and adjusted against additional paid in capital.
On November 4, 2015, the Company issued
a total of 34,520 shares of common stock fair valued at $41 for professional services performed related to settling with the dissatisfied
shareholders.
At December 31, 2016 and 2015 there
were 69,322,426 shares of common stock issued and outstanding.
NOTE E – INCOME TAXES
The income tax provision differs from the amount computed
by applying the U.S. Federal and state statutory corporate income tax rates as follows:
|
|
Years Ended
December 31,
|
|
|
2016
|
|
2015
|
U.S Statutory Corporate Income Tax Rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
State Income Tax
|
|
|
(7.0
|
)%
|
|
|
(7.0
|
)%
|
Change in Valuation Allowance on Deferred Tax Asset
|
|
|
41.0
|
%
|
|
|
41.0
|
%
|
Effective Rate
|
|
|
—
|
%
|
|
|
—
|
%
|
Net deferred tax assets and liabilities
consist of the following components:
|
|
December 31,
2015
|
|
December 31
2015
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carry-forward
|
|
$
|
142,645
|
|
|
$
|
130,558
|
|
Valuation Allowance
|
|
|
(142,645
|
)
|
|
|
(130,558
|
)
|
Net Deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company’s net operating loss carry forwards of
$347,915 will begin to expire in 2028.
F-9
Judo Capital Corp.
Formerly Classic Rules Judo Championships,
Inc.
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
NOTE F – RELATED PARTY TRANSACTIONS
During the year ended December 31, 2015
the Company received cash contributions from a related party totaling $32 and made net repayments to related parties of $74. Additionally,
there was $128 which was expenses paid by this related party on behalf of the Company. The Company currently operates out of the
office related party free of rent.
There was $0 due to related parties as of December 31, 2016
and 2015.
On October 15, 2015, the Company issued 50,000,000 shares
of common stock to Gladstone Ventures, LLC which the Company’s CEO is a Managing Member, for cash proceeds of $30,000 and
a subscription receivable of $30,000, which was subsequently collected on October 4, 2016.
NOTE G – COMMITMENTS AND CONTINGENCIES
During the third quarter of 2014, the
Company identified fraudulent activities entered into by its former CEO who is also a former member of the Board of Directors.
The former officer and director of the Company entered into certain employment agreements and convertible notes payable without
the proper authorization of the Company or other members of its Board of Directors. The employment agreements and convertible notes
payable were entered into during the three months ended June 30, 2014. The Company assessed its potential responsibility for these
liabilities entered into and determined it to be remote due to the former officer not having received approval from the Company
board of directors to enter into such transactions and the employment agreements and notes being entered into through a fictitious
entity with which the Company has no previous or current affiliation with. As such, the impacts of these agreements are not reflected
in these financial statements.
NOTE F – SUBSEQUENT EVENTS
The Company amended its Certificate of Incorporation on February
15, 2017 to change its name from Classic Rules Judo, Inc. to Judo Capital Corp.
On February 21, 2017, the Company received $20,000 under
its credit facility to Delshah Ventures to fund general working capital requirements.
F-10