The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated
Financial Statements
March 31, 2017 and 2016
Note 1 - Business
Buscar Company. (“Buscar”, “we”, “us”, “our”, the “Company”) was incorporated in Nevada as Cascade Springs Ltd. on January 19, 2010. In 2012, we amended our Articles of Incorporation to change our name to Colorado Gold Mines, Inc. On June 18, 2014, changed our name to Buscar Oil, Inc. On May 19, 2015, the Company changed its name to Buscar Company. Buscar is domiciled in the state of Colorado, and its corporate headquarter is located in Los Angeles, CA. The Company selected March 31 as its fiscal year end.
The Company’s business is the buying, selling and racing of thoroughbreds that can race in the allowance and stakes levels of thoroughbred racing; however, the Company will initially begin in the claiming level of thoroughbred racing. The Company intends to acquire in its claiming division before acquiring horses for its allowance/stakes division. These horses will provide the Company with revenue and a foundation to build out a stakes level stable. The Company’s main focus will be acquiring horses that will be capable of racing in stake races throughout the Country.
Note 2 - Summary of Significant Accounting Policies
The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:
Use of Estimates and Assumptions
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 reporting period. Actual results could materially differ from those estimates. It is reasonably possible that a change in the Company’s estimates will occur in the near term and such change could be material as information becomes available. The Company’s estimates include thoroughbreds reserve for potential impairment, and contingent liabilities.
Consolidation Policy
The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiary, Buscar Stables, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Cash
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At March 31, 2017 and 2016, the Company had $286,527 and $0 of cash, respectively.
Income Taxes
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement 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 the 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 that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.
As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We have identified the U.S. federal and California as our “major” tax jurisdictions. Generally, we remain subject to Internal Revenue Service examination of our 2012 through 2016 U.S. federal income tax returns, and remain subject to California Franchise Tax Board examination of our 2012 through 2016 California Franchise Tax Returns. However, we have certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized.
Thoroughbreds
The Company depreciates thoroughbreds via straight-line depreciation over its useful life of 3 years.
The thoroughbreds are stated at the lower of cost or market value. The cost was deemed to be the best evidence of market value and the company’s thoroughbreds were therefore stated at cost. Costs of maintaining horses prior to maturity and entered into a race or disposition are capitalized as additional costs of the horse. When a horse is sold or otherwise disposed of, the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the statement of operations.
The company evaluates the recoverability of its Long Term Assets in accordance with ASC topic 360, which requires recognition of impairments of long lived assets in the event an indication of impairment exists and the net book value of such assets exceeds the expected future value net cash flows attainable to such assets. The Company did not recognize any impairment losses for any periods presented.
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
Thoroughbreds
|
|
$
|
625,101
|
|
|
$
|
-
|
|
Cost of development
|
|
|
410,529
|
|
|
|
-
|
|
|
|
|
1,035,630
|
|
|
|
-
|
|
Accumulated depreciation
|
|
|
(94,187
|
)
|
|
|
-
|
|
Thoroughbreds, net
|
|
$
|
941,443
|
|
|
$
|
-
|
|
Cost of Development represent stud fee, boarding, training, blacksmith, veterinary and land use for the horses. These specific costs are capitalized until the horse reaches maturity.
During the years ended March 31, 2017 and 2016, the Company recorded depreciation of $94,187 and $0, respectively.
Thoroughbred Revenue Recognition
The Company pursues opportunities to realize revenues from a principal activity: breeding the thoroughbreds. It is the Company’s policy that revenues and gains will be recognized in accordance with ASC Topic 605-10-25, “Revenue Recognition.” Under ASC Topic 605-10-25, revenue earning activities such as selling the horses and the Company has substantially accomplished all it must do to be entitled to the benefits represented by the revenue. Gains or losses from the sale of the horses are recognized when the horse is sold, and the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the statement of operations.
Basic and Diluted Loss Per Share
The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
The following is a reconciliation of the numerator and denominator used for the computation of basic and diluted net loss per common shares:
|
|
Year Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Numerator:
|
|
|
|
|
|
|
Net loss available to stockholders
|
|
$
|
(3,372,540
|
)
|
|
$
|
(525,197
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares – Basic and Diluted
|
|
|
12,179,422
|
|
|
|
292,492
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share – Basic and Diluted
|
|
$
|
(0.28
|
)
|
|
$
|
(1.80
|
)
|
Stock-Based Compensation
ASC 718,
”Compensation – Stock Compensation,”
prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Accordingly, all of the stock compensation vested as of March 31, 2017 as services were rendered and fulfilled as of March 31, 2017 and stocks were issued to employees and consultants.
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50,
”Equity – Based Payments to Non-Employees.”
Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense totaled $2,686,000 and $357,000 for the years ending March 31, 2017 and 2016, respectively. The Company did not have any stock options outstanding as of March 31, 2017 and 2016.
Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of cash, prepaid expenses, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.
The Company adopted ASC Topic 820, ”
Fair Value Measurements
(“ASC Topic 820”),” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.
The three-level hierarchy for fair value measurements is defined as follows:
|
·
|
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;
|
|
|
|
|
·
|
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;
|
|
|
|
|
·
|
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement
|
Reclassifications
Certain prior year amounts have been reclassified to conform with the current year presentation for comparative purposes.
Recent Accounting Pronouncements
The FASB has issued Accounting Standards Update (ASU) No. 2017-09, ”
Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting.”
ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award. The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718,
Compensation—Stock Compensation,
to the modification of the terms and conditions of a share-based payment award. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. Effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The Company does not anticipate the adoption of ASU 2017-09 will have a material impact on its consolidated financial statements.
The FASB has issued Accounting Standards Update (ASU) No. 2017-01, ”
Business Combinations (Topic 805): Clarifying the Definition of a Business,”
clarifying the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. They also provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. For public companies, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company does not anticipate the adoption of ASU 2017-01 will have a material impact on its consolidated financial statements.
Note 3 - Going Concern
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At March 31, 2017, the Company had not yet achieved profitable operations, has accumulated losses of $18,640,688 since its inception and expects to incur further losses in the development of its business, all of which raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on terms acceptable to the Company.
Note 4 - Due to Related Party
During the year ended March 31, 2017, the Company borrowed a total amount of $191,796 from a shareholder, who is also married to the CEO of the Company, and repaid $218,596 for payments of operating expenses and purchase of thoroughbreds and $39,508 for a management fee.
On March 21, 2016, the Company issued 3,750 shares of common stock to a cons ultant, who is married to our CEO, with a fair value of $225,000 for consulting services. Consultant was being retained to assist the Company in acquiring and locating thoroughbreds to acquire for its stable and to perform any and all duties as requested by the Company’s CEO. Additionally, Consultant provided use of his thoroughbred to obtain Buscar Stables license in California. This contract expired on April 30, 2016.
As of March 31, 2017 and 2016, the Company had due to related part of $0 and $26,800, respectively.
Note 5 – Note payable
During the year ended March 31, 2017, the Company repaid $7,500 to a former officer of the Company. During the year ended March 31, 2016, the Company borrowed a total amount of $13,371 for payments of operating expense on behalf of the Company. As of March 31, 2017, and 2016, the Company recorded note payable of $5,871 and $13,371, respectively. The note bears no interest and is due upon demand.
Note 6 - Commitments and Contingencies
As of March 31, 2017, the Company had a total of $207,560 of outstanding liabilities. As of this date, the Company recognizes $177,270 of outstanding liabilities related to previous Company directors, Robert Sawatsky and Kelly Fielder. The Company’s legal counsel believes that the outstanding liabilities are expected to be paid back to the previous Company directors, Robert Sawatsky and Kelly Fielder, who had originally loaned money to the Company. However, there has been no resolution of this event.
Note 7 - Equity
Preferred Stock
The Company has authorized 50,000,000 preferred shares with a par value of $0.0001 per share. Board of Directors are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.
Series A Preferred Stock
The Company has designated 10,000,000 preferred shares of Series A Preferred Stock with a par value of $0.0001 per share. As at March 31, 2017 and 2016, the Company had 8,000,000 shares of Series A Preferred Stock issued and outstanding.
Series B Preferred Stock
The Company has designated 10,000,000 preferred shares of Series B Preferred Stock with a par value of $0.0001 per share.
During the year ended March 31, 2017, 10,000,000 shares of Series B Preferred Stock were issued to our CEO for par value as there is no stated value.
During the year ended March 31, 2017, 35,000 shares of Series B Preferred Stock were converted at rate of 1 preferred share to 400 common shares, resulting in the issuance of 14,000,000 shares of common stock, for a value of $1,400, of which $1,397 was recorded as a deemed dividend.
As at March 31, 2017 and 2016, the Company had 9,965,000 and 0 shares of Series B Preferred Stock issued and outstanding, respectively.
Common Stock
The Company has authorized 500,000,000 shares of common stock with a par value of $0.0001 per share.
On June 28, 2016, with an effective date of July 13, 2016, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State to effect a 1-for-200 share Reverse Split of the Company’s issued and outstanding common stock. Common share amounts and per share amounts in these consolidated financial statements have been retroactively adjusted to reflect this reverse split.
During the year ended March 31, 2017, the Company issued common shares, as follows:
|
·
|
2,447,500 shares for services, with a fair value of $2,686,000 as compensation
|
|
|
|
|
·
|
1,760,000 shares issued for $1.10 per share, for $1,936,000.
|
|
|
|
|
·
|
643 shares issued for $45,000.
|
|
|
|
|
·
|
803 shares for rounding up adjustment on the reverse split.
|
|
|
|
|
·
|
14,000,000 shares were issued for the conversion of 35,000 shares of Series B Preferred Stock.
|
During the year ended March 31, 2016, the Company issued common shares, as follows:
|
·
|
On June 8, 2015, Troy Grant, the Company’s former chief executive officer and sole member of the Board of Directors and current Chief Operating Officer, was issued 325,000 shares of restricted Common Stock in exchange for accrued salaries, bonus and expenses of $300,000. No shares have been issued to Mr. Grant prior to June 9, 2015 with regard to deferred salary and bonus.
|
|
|
|
|
·
|
On March 21, 2016, the Company issued 3,750 shares of common stock to a consultant, who is married to the CEO, with a fair value of $225,000 for consulting services (see Note 4).
|
|
|
|
|
·
|
In June 2015, 6,500 shares of common stock, having a market value of $187,514, were issued to two consultants to settle debt of $65,000. The Company recognized a loss on debt settlement of $122,541 and recorded this amount to additional paid in capital.
|
As of March 31, 2017 and 2016, the Company had 18,581,321 and 372,375 shares of common stock issued and outstanding, respectively.
Note 8 - Income Taxes
The significant components of the Company’s deferred tax assets are as follows:
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
Deferred tax assets
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
18,640,688
|
|
|
$
|
15,261,391
|
|
Less: Valuation allowance for deferred tax asset
|
|
|
(18,640,688
|
)
|
|
|
(15,261,391
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of 34% and state statutory rate of 6.9% for 2017 and 2016 is as follows:
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
|
|
|
|
|
|
|
Income tax benefit at federal statutory rate
|
|
|
(34.00
|
)%
|
|
|
(34.00
|
)%
|
State income tax benefit, net of effect on federal taxes
|
|
|
(6.90
|
)%
|
|
|
(6.90
|
)%
|
Increase in valuation allowance
|
|
|
40.90
|
%
|
|
|
40.90
|
%
|
Income tax expense (benefit)
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The amount taken into income as deferred tax assets must reflect that portion of the net operating loss carryforwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carryforwards, due to the uncertainty surrounding their realization.
No provision for income taxes has been provided in these consolidated financial statements due to the net loss. The effective tax rate differs from the 34% statutory rate for the year ended March 31, 2017 due to the change in valuation allowance.
Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards of approximately $18,640,688 for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years. They typically expire 20 years from when incurred.
Note 9 - Subsequent Events
Subsequent to the year end, 100,000 shares of common stock were issued for services.