The accompanying unaudited consolidated financial statements of Experience Art and Design, Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (“Commission” or “SEC”). While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary in order to make the consolidated financial statements not misleading and for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Description of Business
Since December 16, 2015 the Company has been focused on two primary business models: the re-work of existing oil wells and dry cleaners, through two wholly owned subsidiary companies: TransAmerican Oil and Metropolitan Dry Cleaners (Metro) respectively. TransAmerican Oil never moved past its signed LOI, a transaction was never consummated, and the Company has shelved and plans to enter the Oil and Gas sector.
Metropolitan Dry Cleaners was going to be a roll-up of existing enterprises with a multi-year history of revenues and profits in a variety of primarily East Coast States. The Company would have provided dry cleaning, laundry, and garment alterations, as offered by the existing target businesses along with regular home pick-up and delivery services. The Company was to have both production facilities and retail storefronts to complement its pick-up and delivery service. The LOI entered into between Metro and a seven-unit operation located on the Cape in Massachusetts and announced on September 14, 2016 has not progressed. Communication between Metro and the company ceased in early-2017 and the transaction does not appear as if it will close at this time.
The Company has been seeking a new company to merge into Metro in order to progress the business plan and allow the previously announced spin-off to take place. There are still on going discussions to find an audited company, or one that can be audited, in the MJ sector to merge into Metro. Once a new deal has been consummated a spin-off will take place and shareholders will receive shares in the newly merged company.
In an 8K filed on January 11, 2017 EXAD outlined its new business model post Metropolitan Dry Cleaners. While waiting for the necessary documents need to facilitate the spin-off of Metro I have been pressing forward with the new business direction. Moving forward the Company is seeking to invest in short-term bridge loans and private company acquisitions that will be built for future spinoffs. The private market continues to presents tremendous opportunities to purchase existing operations along with revenue and net earnings that can be packaged into a clean shell and spun off with dividends given to shareholders of EXAD. EXAD will also seek to purchase a company(s) in the financial services or insurance sector. This acquisition is required to meet listing standards and to show an existing and prior revenue history for a future up-list of EXAD off the OTCQB. Working with a shareholder friendly base EXAD and its shareholders can achieve great things together.
Note 2
Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statement have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”), regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-K should be read in conjunction with recent company filings with the SEC.
Management's Estimates and Assumptions
The preparation of consolidated 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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.
Cash and Equivalents
The Company’s cash and cash equivalents consist of cash, as well as interest and non-interest bearing balances due from banks both foreign and domestic with an original maturity of three months or less. Amounts in depository accounts fluctuate on a daily basis due to activity and liquidity needs. It is the Company’s policy not to deposit large sums of cash within foreign operational deposit accounts due to financial instability in the region and the Company fund operations on an as needed basis. The Company maintains cash in bank deposit accounts domestically, which at times may exceed the federally insured limits throughout the course of operations.
Accounts Receivable
Accounts receivable consist primarily of trade receivables, net of a valuation allowance for doubtful accounts.
The Company attempts to limit its exposure to losses on accounts receivable by monitoring the size and economic strength of its receivables, and whenever appropriate reflect a reserve for accounts that have been deemed potentially uncollectable. Monitoring occurs on a regular basis and exposure is limited by the vetting process for customers.
Allowance for Doubtful Accounts
The Company extends credit to customers and other parties in the normal course of business. The Company regularly reviews outstanding receivables and provides for estimated losses through an allowance for doubtful accounts. In evaluating the level of established reserves, the Company makes judgments regarding its customers' ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. When the Company determines that a customer may not be able to make required payments, the Company increases the allowance through a charge to income in the period in which that determination is made.
Property, Plant and Equipment
The Company accounts for property, plant and equipment at historical cost less accumulated depreciation. Historical cost includes all expenditures that are directly attributable to the acquisition of fixed assets. Subsequent costs are included in the asset's carrying amount and are recognized as a separate asset, as appropriate, only when there is the probability of future economic benefits. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:
Plant and machinery
10 to 20 years
Furniture and fixtures
10 to 17 years
The assets' residual values and useful lives are reviewed, and adjusted as appropriate at least once a year. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount.
Revenue Recognition
Revenue is recognized when the earning process is completed, the risks and rewards of ownership have transferred to the customer, which is generally the same day as delivery or shipment of the product, the price to the buyer is fixed or determinable, and collection is reasonably assured. Taxes assessed by a governmental authority that are incurred as a result of a revenue transaction are not included in revenues. The Company has no significant sales returns or allowances.
Income Taxes
The Company is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized. Interest and penalties associated with income taxes are included in selling, general and administrative expense.
A tax benefit from an uncertain position may be recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of March 31, 2017, the Company had not recorded any tax benefits from uncertain tax positions.
Net Income (Loss) Per Common Share
The basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares outstanding during a period. Diluted net income (loss) per common share is computed by dividing the net income (loss), adjusted on an as if converted basis, by the weighted average number of common shares outstanding plus potential dilutive securities. There were $68,250 dilutive securities were outstanding as of March 31, 2017.
Stock-Based Compensation
The Company sometimes grants shares of stock for goods and services and in conjunction with certain agreements. These grants are accounted for based on the grant date fair values.
Subsequent Events
On May 1, 2017 the Company filed an Amendment with the State of Nevada to increase its Authorize shares of Common stock in anticipation of a pending acquisition.
On May 4, 2017 the Company’s former officer wrote-off all accrued salary through the period ending January 6, 2017, the date of his resignation. This write-off is in addition to the 8K on December 12, 2016 where the former officers wrote-off all accrued salary for 2016 and gives shareholders certainty of no salary liability from the former officer.
On May 5, 2017 the Company filed an 8K stating the Metro transaction has been canceled and Mr. Gorman has decided to resign from the Company. Mr. Dwyer is currently the sole officer and director of the Company and controls all 5 million shares of Convertible Preferred stock.
On May 10, 2017 the Company filed an 8k updating shareholders on pending events regarding a pending transaction that would be completed as a triangular reverse merger and the status of entering the Company into the DTC system.
New Accounting Pronouncements
There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our consolidated financial position, operations or cash flows.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Risk and Uncertainties
The Company is subject to risks common to companies in the technology industries, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel.
Note 3
Going Concern and Liquidity Considerations
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. For the quarter ended March 31, 2017, the Company has a gain from operations of $97,027 and had an accumulated deficit of $1,309,510 The 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 December 31, 2017.
These factors, among others, raise substantial doubt about the Company’s 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.
Note 4
Intangibles
The $77,050 in Intangible (“Other assets”) consist primarily of tradenames, logos, LOI, and Business Development activities, which were acquired in the fourth quarter of 2015 from a related-party, Derrick Lefcoe. The Company acquired a shell with a market value of $20,000 during the fourth quarter of 2016.
Note 5
Short-Term Borrowings
The Company has received funding from our sole officer and director and a non-related 3
rd
party, which has been used to fund the ongoing operations in the interim until permanent financing can be arranged. As of March 31, 2017, the total amount borrowed was $17,196
Note 6
Long-Term Debt
None
Note 7
Income Taxes
During the quarter ending 2017, The Company has been operating at a net operational loss the federal tax rates on income range 15% to 35% stagger at different income brackets. Since the Company had a net operation loss, no tax provision for U.S. tax purposes was deemed necessary at this time.
Note 8 Equity
On January 13, 2016 the Company issued our sole officer and director 45,000,000 shares of our restricted Common stock in exchange for his services until the next Annual meeting.
On January 13, 2016 the Company issued our sole officer and director 55,000,000 shares in exchange for certain assets acquired by the Company, which make up the new business direction of the Company.
During the first quarter ending March 31, 2016 the Company exchanged $21,500 for 43,500,000 shares of its Common stock.
On May 30, 2016 the Company issued one of our Directors 50,000,000 shares of our restricted Common stock in exchange for his services until the next Annual meeting.
During the quarter ending December 31, 2016 the Company exchanged $29,000 for 29,000,000 shares of its Common stock.
During the first quarter ending March 31, 2017 the Company exchanged $45,000 for 45,000,000 shares of its Common stock.
Note 9 Related Party Transactions
The Company issued 55 million shares of its restricted Common stock from Derrick Lefcoe our sole officer and director In return for various intangible assets that consist primarily of tradenames, logos, LOI, and Business Development activities for both Metropolitan Dry Cleaners and TransAmerican Oil.
During the twelve months of 2016 the Company’s two Directors exchanged 100,000,000 shares of the Corporation restricted Common Stock for 5,000,000 shares of Series A Preferred stock.