UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

☐     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 333-208350

 

CARNEGIE DEVELOPMENT, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

76-0513297

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3495 Lakeside Drive, #1087, Reno, NV, 89509.

(Address of principal executive offices) (Zip Code)

 

(800) 345-8561

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes     ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes     ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging Growth Company

 

If an Emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes     ☒ No

 

As of November 14, 2020, there were 46,203,716 shares of common stock issued and outstanding.

 

 

 

   

TABLE OF CONTENTS

 

 

Page

 

PART 1. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

3

 

Item 2.

Management’s Discussions and Analysis of Financial Condition and Results of Operations

 

15

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

17

 

Item 4.

Controls and Procedures

17

 

 

 

 

PART 2. OTHER INFORMATION

 

 

 

 

 

Item 1.

Legal Proceedings

 

18

 

Item 2.

Unregistered Sales of Securities and Use of Proceeds

 

18

 

Item 5.

Other Information

 

18

 

Item 6.

Exhibits

19

 

 

 

 

SIGNATURES

20

 

  

 

2

 

    

Carnegie Development, INC.

 

Unaudited Condensed Consolidated Balance Sheet

 

 

 

 

 

Sep 30,

2020

 

 

Dec 31,

2019

 

 

 

Notes

 

 

USD

 

 

USD

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

1,039

 

 

 

84

 

Construction in progress

 

 

 

 

 

10,568,691

 

 

 

-

 

 

 

 

 

 

 

10,569,730

 

 

 

84

 

 

 

 

 

 

 

 

 

 

 

 

 

Non- Current assets

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

 

 

 

15,755,181

 

 

 

-

 

Goodwill

 

3

 

 

 

22,006,328

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37,761,509

 

 

 

-

 

TOTAL ASSETS

 

 

 

 

 

 

48,331,239

 

 

 

84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payables and accruals

 

 

 

 

 

 

3,922,543

 

 

 

230,375

 

Loan from related party

 

4

 

 

 

155,854

 

 

 

90,411

 

Credit card payable

 

 

 

 

 

 

177

 

 

 

1,724

 

 

 

 

 

 

 

 

4,078,574

 

 

 

322,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Promissory Notes

 

5

 

 

 

9,755,888

 

 

 

-

 

Loan from bank

 

 

 

 

 

 

11,603,564

 

 

 

-

 

Other non-current liabilities

 

 

 

 

 

 

723,237

 

 

 

-

 

EIDL from SBA

 

 

 

 

 

 

569,300

 

 

 

-

 

 

 

 

 

 

 

 

22,651,989

 

 

 

-

 

Total liabilities

 

 

 

 

 

 

26,730,563

 

 

 

322,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock: 1,000 shares authorized, par value $0.001 per share; 1,000 shares issued and outstanding on September 30, 2020 and 1,000 shares issued and outstanding on December 31, 2019

 

6

 

 

 

1

 

 

 

1

 

Series I Cumulative Convertible Preferred Stock: 100,000 shares authorized, par value $0.001 per share; 21,786 shares issued and outstanding on September 30, 2020 and Nil shares issued and outstanding on December 31, 2019,

 

6

 

 

 

22

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock: 250,000,000 shares authorized, par value $0.00001 per share, 46,203,716 shares issued and outstanding on September 30, 2020 and 41,153,156 shares issued and outstanding on December 31, 2019

 

6

 

 

 

3,532,757

 

 

 

3,532,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interests

 

 

 

 

 

 

220,063

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid in capital

 

6

 

 

 

21,790,242

 

 

 

3,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated loss

 

 

 

 

 

 

(3,942,409 )

 

 

(3,859,183 )

Total shareholders’ equity

 

 

 

 

 

 

21,600,676

 

 

 

(322,426 )

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

48,331,239

 

 

 

84

 

 

See accompanying notes to financial statements.

   

 
3

Table of Contents

 

Unaudited Condensed Consolidated Statement of Operations

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

Sept 30,

2020

 

 

Sep 30,

2019

 

 

Sep 30,

2020

 

 

Sep 30,

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Cost of revenues

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

GROSS LOSS

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and Administrative expense

 

 

(51,008 )

 

 

(45,779 )

 

 

(83,226 )

 

 

(57,062 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FOR THE PERIOD

 

 

(51,008 )

 

 

(45,779 )

 

 

(83,226 )

 

 

(57,062 )

  

See accompanying notes to financial statements.

 

 
4

Table of Contents

   

Unaudited Condensed Consolidated Statement of Cash Flows

  

 

 

 

 

Nine months ended

 

 

 

 

 

September 30

 

 

September 30

 

 

 

 

 

2020

 

 

2019

 

 

 

Notes

 

USD

 

 

USD

 

 

 

 

 

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Loss for the period

 

 

 

 

(83,226 )

 

 

(57,062 )

Adjustments for :

 

 

 

 

 

 

 

 

 

 

Working capital change :

 

 

 

 

 

 

 

 

 

 

Transfer of construction in progress

 

 

 

 

(10,568,691 )

 

 

-

 

Change in accounts payables and accruals

 

 

 

 

3,692,167

 

 

 

627

 

Change in credit card payable

 

 

 

 

(1,546 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activity

 

 

 

 

(6,961,296 )

 

 

(56,435 )

 

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITY

 

 

 

 

 

 

 

 

 

 

Transfer of Land

 

 

 

 

(15,755,181 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activity

 

 

 

 

(15,755,181 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Loan from related party

 

 

 

 

65,443

 

 

 

56,519

 

Transfer of Promissory Notes

 

 

 

 

9,755,888

 

 

 

-

 

Transfer of Loan from bank

 

 

 

 

11,603,564

 

 

 

-

 

Transfer of other non-current liabilities

 

 

 

 

723,237

 

 

 

-

 

Transfer of EIDL from SBA

 

 

 

 

569,300

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Net cash from financing activities

 

 

 

 

22,717,432

 

 

 

56,519

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

 

 

955

 

 

 

84

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

 

 

84

 

 

 

-

 

Cash and cash equivalents at end of period

 

 

 

 

1,039

 

 

 

84

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash financing activity

 

 

 

 

 

 

 

 

 

 

Conversion of Additional paid in capital into equity share capital

 

 

 

 

-

 

 

 

1,142,640

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Accounts payable into equity share capital

 

 

 

 

-

 

 

 

120,000

 

  

See accompanying notes to financial statements.

 

 
5

Table of Contents

    

Unaudited Statement of shareholders’ equity

  

 

 

 

 

 

 

 

 

Additional

 

 

Non-

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Accumulated

 

 

paid in

 

 

controlling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

loss

 

 

 capital

 

 

interests

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as on January 1, 2019

 

 

1,000

 

 

 

1

 

 

 

41,153,156

 

 

 

2,270,117

 

 

 

(3,536,757 )

 

 

1,146,639

 

 

 

-

 

 

 

(120,000 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued

 

 

-

 

 

 

-

 

 

 

5,050,560

 

 

 

1,262,640

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,262,640

 

Converted to equity shares

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(,142,640

)

 

 

-

 

 

 

(1,142,640 )

Net loss during the year

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(322,426 )

 

 

-

 

 

 

-

 

 

 

(322,426 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as on December 31, 2019

 

 

1,000

 

 

 

1

 

 

 

46,203,716

 

 

 

3,532,757

 

 

 

(3,859,183 )

 

 

3,999

 

 

 

-

 

 

 

(322,426 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued for acquisition of SPEs

 

 

21,786

 

 

 

22

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

21,786,243

 

 

 

-

 

 

 

21,786,265

 

Transfer on acquisition of SPEs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

220,063

 

 

 

220,063

 

Net loss during the year

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(83,226 )

 

 

-

 

 

 

-

 

 

 

(83,226 )

Balance as on September 30, 2020

 

 

22,786

 

 

 

23

 

 

 

46,203,716

 

 

 

3,532,757

 

 

 

(3,942,409 )

 

 

21,790,242

 

 

 

220,063

 

 

 

21,600,676

 

 

See accompanying notes to financial statements. 

 

 
6

Table of Contents

  

Notes on Accounts for the 3rd quarter ended September 30, 2020

 

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Carnegie Development Inc (the “Company” or the “Parent Company”), is a publicly trading company under the symbol, “CDJM”

 

The company website is https://www.carnegie-development.com/

 

This Company was previously known as:

 

 

·

Escue Energy Inc until July 1, 2019

 

o

State of incorporation changed from Delaware to Nevada in 2015

 

·

eDoorways Corporation,Inc. until 2015

 

·

M Power Entertainment, Inc. until 2007

 

·

GK Intelligent Systems, Inc. until 2005

 

·

Technicraft Financial, Ltd. until 1994

 

·

Incorporated in Delaware in February 1988

   

Effective July 1st, 2019 the Articles of Incorporation has been amended and the new name is Carnegie Development, Inc.

 

On Friday 5th June 2020, FINRA approved the name change as well as the symbol change. The new CUSSIP is 14350V108

 

The Company, and its Special Purpose Entities are engaged principally in the ownership, management, development, and operation of real estate development activities

 

On September 30, 2020, the Company acquired 99% of the Membership Interest ownership of six Special Purpose Entities (the “SPE”) in exchange of (a) Promissory Notes carrying an interest at the rate of 6% payable on or before September 30, 2025 and (b) 21,786 Shares of Series I Cumulative Convertible Preferred Stock.

 

The Group comprises of the Company and the following Special Purpose Entities:

 

 

 

Effective

Beneficial

Ownership

 

 

Principal Activity

 

126 Villita LLC

 

 

99%

 

Real Estate Development

 

D4AVEG, LLC,

 

 

99%

 

Real Estate Development

 

D4KL LLC

 

 

99%

 

Real Estate Development

 

Mansion Apartment Homes at Maine Creek LLC

 

 

99%

 

Real Estate Development

 

Ridgeview Addition LLC

 

 

99%

 

Real Estate Development

 

Villita Towers LLC

 

 

99%

 

Real Estate Development

 

 

Going concern

 

The Group has an accumulated deficit of $ 3,942,409 as on the reporting date and there was no revenue since inception.

 

The Group is also seeking debt or equity financing to fund its development plan although no financing arrangements are currently in place and the Group can provide no assurance that financing will be available on acceptable terms. However, the management believes that the actions for (a) obtaining the additional funds and (b) implementing its strategic plans, provide the opportunity for the Group to continue as a going concern.

 

 
7

Table of Contents

   

Basis of Presentation

 

These condensed financial statements have been prepared by the Company in accordance with GAAP for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of the periods presented. The results of operations for the three and nine months ended September 30, 2020 and 2019, are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates and Assumptions

   

The preparation of condensed financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the year. The Company considered impacts to its estimates related to COVID-19, as appropriate, within its unaudited condensed consolidated financial statements and there may be changes to those estimates in future periods. The Company believes that its accounting estimates are appropriate after considering the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic. Actual results could differ from those estimates.

 

Principles of Consolidation

 

The accompanying Condensed Consolidated Financial Statements include the accounts of the Company, the Company’s SPEs with the calculations of the controlling interest in the SPEs by the Company, in which calculations the Company determined to be a primary beneficiary of a variable interest entity (“VIE”) in accordance with the Consolidation guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). All inter-company balances and transactions have been eliminated in consolidation. The information presented in the accompanying Condensed Consolidated Financial Statements is unaudited and reflects all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited Annual Report on Form 10-K for the year ended December 31, 2019 (the “10-K”), as certain disclosures in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, that would duplicate those included in the 10-K are not included in these Condensed Consolidated Financial Statements

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Group considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

 

Construction in progress

   

Construction in progress is stated at cost. Cost comprises the cost incurred during the development of the project, including:

 

i.

the costs incurred on development works, construction, etc., together with the costs of ancillary activities; and

 

 

ii.

the cost of various design and other technical studies, infrastructure design and master planning conducted in connection with the project, together with all other expenses incurred in connection therewith.

   

 
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Table of Contents

    

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets until such time as the assets are substantially ready for their intended use. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

 

Accounts payables

 

Accounts payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non- current liabilities.

 

Accounts payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

 

Borrowings

 

Long term loans are recognized initially at fair value, net of transaction costs incurred. Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

 

Concentration of Credit Risks

   

The Group is subject to concentrations of credit risk primarily from cash and cash equivalents.

 

The Group’s cash and cash equivalents accounts are held at financial institutions and are insured by the Federal Deposit Insurance Corporation, or the FDIC, up to $250,000. As on the reporting date, there were no cash balances in excess of federally insured limits

 

Fair Value of Financial Instruments

 

The Group accounts, for the assets and liabilities measured at fair value on a recurring basis, in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements

 

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entities own assumptions.

 

 
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The Group did not have any Level 2 or Level 3 assets or liabilities on the reporting date.

 

Additional Disclosures Regarding Fair Value Measurements

 

The carrying value of cash and cash equivalents and loan from related party approximate their fair value due to the short maturity of these items.

 

Revenue Recognition

 

The Group recognizes revenue on arrangements in accordance with ASC 606 — Revenue from Contracts with Customers. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability of the resulting receivable is reasonably assured. Since inception and until now, this Group has not earned any revenue.

 

Advertising

 

The Group expenses advertising costs as incurred. The Group did not spend any money for the advertising, during the reporting period.

 

Share-Based Payment

 

The Group accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, Under the fair value recognition provisions of this topic, stock based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.

 

Basic and Diluted Earnings per Share

 

Basic earnings per share are calculated by dividing the income available to stockholders by the weighted- average number of shares of Common Stock outstanding during each period. Diluted earnings per share are computed using the weighted average number of shares of Common Stock and dilutive Common Stock share equivalents outstanding during the period

 

Dilutive Common Stock share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method). Earnings per share calculations are provided as part of the income statement.

 

Fair Value Measurements

 

For certain financial instruments, including cash and cash equivalents, credit card payable, accounts payable and loan from related party, the carrying amounts approximate fair value due to their relatively short maturities.

 

The Group follows ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheet for current liabilities qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

 

 
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The three levels of valuation hierarchy are defined as follows:

 

Level 1 inputs to the valuation methodology are quoted prices for identical assets or 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, either directly or indirectly, for substantially the full term of the financial instrument.

 

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The Group did not identify any non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with ASC 815

 

ASC 825-10 “Financial Instruments.” permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The Group chose not to elect the option to measure the fair value of eligible financial assets and liabilities.

 

Provisions

 

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.

 

Net Income per Share

 

The Group computes net income (loss) per share in accordance with ASC 260-10, “Earnings per Share.” The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per share gives effect to all dilutive potential common shares outstanding during the period using the “as if converted” basis.

 

3. GOODWILL

   

Group acquired a goodwill in the current year on acquisition of six Special Purpose Entities by acquiring 99% shares in exchange for the consideration.

 

Goodwill was derived by deducting total value of liabilities of SPEs taken over by the Company, from total value of SPEs at which they are acquired.

 

The Company issued 21,786 Series I Cumulative Convertible Preferred Stock, at issue price of $1 having liquidation value of $ 1000 per share.

 

4. LOAN FROM RELATED PARTY

 

A short-term loan was extended by a related party to finance working capital requirements of the Company. The loan is unsecured, and non- interest bearing, with no set terms of repayment.

 

5. NOTE PAYABLE

   

The Company issued Promissory Note as part of acquisition of six Special Purpose Entities, in exchange of the existing Promissory Notes signed by these six Special Purpose Entities. The note payable is payable on demand, maturing on September 30, 2025, bearing interest rates of 6% per annum, payable quarterly. The Note is to be secured by a Collateral Pledge of the Interest to and in favor of Transferor of all six SPEs.

 

 
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6. COMMON STOCK AND PREFERRED STOCK

 

Common Stock

 

There is currently only one class of common stock. Each share common stock is entitled to one vote.

 

The authorized number of shares of common stock of the Company on the reporting date was 250,000,000 shares with a par value per share of $0.00001. Authorized shares that have been issued and outstanding are 46,203,716 as on the reporting date. Past dues were settled by share issuance as reflected in Statement of Shareholders equity.

 

Preferred Stock

 

Series A - [1] Designation: A series of preferred stock is hereby designated as Series A Preferred Stock. [2] Liquidation Preference: The holders of the Series A Preferred Stock has no liquidation preference. [3] Dividends: The holders of the Series A Preferred Stock shall not receive dividend. [4] Number: The number of shares is fixed at 1,000. As on the reporting date, 1,000 shares are authorized, issued and outstanding. [5] Conversion: The Series A Preferred Stock is not convertible into shares of common stock. [7] Voting Rights: The Series A Preferred Stock, collectively, are entitled to that number of votes which shall equal Seventy-five percent (75%) of all eligible votes. There is currently 1 shareholder of record of the company’s common stock

 

Series I - [1] Designation: A series of preferred stock is hereby designated as Series I Cumulative Convertible Preferred Stock. [2] Par value is $0.001 per share; [3] Authorized to issue 100,000 shares; [3] Liquidation Preference: The holders of the Series I Cumulative Convertible Preferred Stock has the liquidation preference over the Junior Securities. [4] Dividends: The holders of the Series I Cumulative Convertible Preferred Stock shall be entitled to receive @ 7% per annum on the “Liquidation Value” as quarterly cumulative dividends in preference to and with priority over dividends upon all “Junior Securities” [5] Number: The number of shares is fixed at 1,000. As on the reporting date, 1,000 shares are authorized, issued and outstanding. [6] Conversion: The Series I Cumulative Convertible Preferred Stock is convertible into shares of common stock at the conversion price and at the option of the holders, either in whole or in part commencing the first business day after 30th June 2021. [7] Conversion Price:  The amount obtained by multiplying (i) 0.9 by (ii) the simple average of the daily closing price of the common stock for the 20 business days ending on the last business day of the calendar week immediately preceding the date of conversion, provided however the conversion price shall not be less than $4 (i.e. 250 common shared per $1,000 Liquidation Value) [8] Voting Rights: The Series I Cumulative Convertible Preferred Stock, collectively, are entitled to limited voting rights on select issues. [9] Liquidation value of the Series I Cumulative Convertible Preferred Stock is $1,000 per share. [10] There is currently 5 shareholders of record of the company’s Series I Cumulative Convertible Preferred Stock [11] The Series I Cumulative Convertible Preferred Stock can be redeemed at the option of the Issuer [12] On September 30, 2020 the Company issued 21,786 shares.

 

Additional paid in capital

 

Additional paid in capital attributable to Series A preferred stock is $ 3,999 and additional paid in capital is attributable to Series I Cumulative Convertible preferred stock is $21,786,243.

 

7. RELATED PARTY TRANSACTIONS

 

Related parties comprise the shareholders, directors, key management personnel of the Company, and entities controlled, jointly controlled, or significantly influenced by such parties.

 

The company enters transaction with related parties which arise in the normal course of business from the commercial transactions and same are approved the board.

 

Since 2019, this company is receiving short loan from a private business entity to pay the bills. The Chairman & the CEO of this company is also managing the private business entity which is providing the short-term loan to this company.

 

No remuneration was paid to any directors or members of key management during the period ended September 30, 2020 (2019: Nil).

 

8. INCOME TAXES

 

Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

 

 
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When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.

 

The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions

 

Tax positions that meet the more likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the grouping balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations.

   

A reconciliation of the Group’s effective tax rate to the statutory federal rate is as follows:

 

 

 

 Sep 30,

2020

 

 

 Dec 31,

2019

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryovers

 

 

3,942,409

 

 

 

3,859,183

 

 Stock-based compensation

 

 

-

 

 

 

-

 

Other temporary differences

 

 

-

 

 

 

-

 

Total deferred tax assets

 

 

3,942,409

 

 

 

3,859,183

 

Valuation allowance

 

 

(3,942,409 )

 

 

(3,859,183 )

Net deferred tax asset

 

 

-

 

 

 

-

 

 

9. CONTINGENCIES AND COMMITMENTS

 

Contingencies

 

Silverland Finance Ltd, Platinum Investment Corporation, Lin Zhou, Jin Wang, and Li Jun (collectively known as plaintiffs) have filed a law suit on (i) Wal1007, LLC, (ü) Wal1009, LLC, (iii) Timothy Barton, (iv) Sada Cumber, and (v) Carnegie Development, Inc. (collectively known as defendants) on November 15, 2019 in the 44th Judicial District of Texas in Dallas County, Texas, Case No DC-19-18361 and on 25th November, 2019, this Group was served with the notice of the court case. On December 30, 2019 this Group filed its (i) Plea in Abatement; (ii) Rule 91A Motion to Dismiss Plaintiff’s Original Petition (“Motion to Dismiss”); (iii) Special Exceptions and Original Answer denying the causes of action asserted against CDI, and (iv) Motion for Protective Order and Motion to Stay Discovery Pre-Trial Proceedings. Upon Plaintiffs filing an Amended Petition thereafter, this Group withdrew the Motion to Dismiss on February 5, 2020. No other material events occurred in this case since 21st March 2020.

 

The Management did not provide any provision for this litigation.

 

 
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Capital commitments

 

On September 30, 2020, the Group has no capital commitments (2019: Nil).

 

10. SUBSEQUENT EVENTS

 

On 11 March 2020, the World Health Organization made an assessment that the outbreak of a coronavirus (COVID-19) can be characterized as a pandemic. As a result, the economic and risk environment in which the Group operates has been impacted. This situation arising and any possible impact to these financial statements is considered a subsequent, non-adjusting event

 

The situation, including the government and public response to the challenges, continue to progress and rapidly evolve. Therefore, the extent and duration of the impact of these conditions remain uncertain and depend on future developments that cannot be accurately predicted at this stage, and a reliable estimate of such an impact cannot be made at the date of authorization of these financial statements.

 

11. RESTATEMENT OF PRIOR YEAR COMPARATIVES

 

Certain figures for the previous year were regrouped/reclassified, wherever necessary, to conform to current year’s presentation. However, such reclassifications do not have any impact on the Group’s previously reported financial results.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This MD&A (“Management’s Discussion and Analysis of Financial Condition and Plan of Operations”) is intended for understanding the historical results of operations during the accounting periods presented in this report and the financial condition. This MD&A should be read in conjunction with the related consolidated financial statements presented in this report and the accompanying notes to consolidated financial statements and contains forward-looking statements that involve risks and uncertainties. The actual results could differ materially from what is anticipated in these forward-looking statements. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.

 

Forward-looking statements can be identified by the use of words such as “expects,” “anticipates,” “plans,” “will,” “should,” “could,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address our growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed, and actual future results may vary materially.

 

Forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

 

 

The uncertainty of profitability;

 

High volatility in the value attributable to our business model and assets;

 

Rapid change in the regulatory and legal environment in which we operate with many unknown future challenges to operating our business in a lawful manner or which will require our business or the businesses in which we invest to be subjected to added costs and/or uncertainty regarding the ability to operate;

 

Risks related to failure to obtain adequate financing on a timely basis and on acceptable terms; and

 

Other risks and uncertainties related to our business plan and business strategy.

 

 
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This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, and readers should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as may be required under applicable law. We cannot guarantee future results, levels of activity, performance or achievements.

 

Results of Operations during the 9 months ended September 30, 2020 as compared to the same period of 9 months in the previous year 2019

 

There was no revenue during this period

 

Expenses during the current quarter are $83,226, which is a considerable increase from $57,062 as expenses of the same three months period in the previous year.

 

The net loss for the current quarter is $83,226, which is also a considerable increase from $57,062 as the net loss for the same three months period in the previous year.

 

Liquidity and Capital Resources

 

During the previous year, the new management completed the formalities and started with a new bank account. At the end of the previous year, the Company identified three special purpose entities engaged in the land development and construction of multi-family homes and signed up the MOU. In September 2020, the contracts were signed, and the special purpose entities are now preparing the audited financials, as required under the regulations. With the acquisition of these 6 special purpose entities, the Company may improve the liquidity in the coming years

 

Cash Flow from Operating Activities

 

Net cash used in operations for the current quarter is $ 6,961,296 as compared to $56,435 for the same period of the three months in the previous year.

      

Cash Flow from Investing Activities

 

Net cash used by investing activities for the current quarter is $15,755,181 as compared to $ 0 for the same as in the same period of the three months in the previous year.

 

Cash Flow from Financing Activities

 

Net cash provided by financing activities for the current quarter is $ 22,717,432 as compared to $ 56,519 for the same as in the same period of the three months in the previous year.

 

 
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Off-balance sheet arrangements

 

The company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

 

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We are a small reporting company as defined by Rule 12b(2) of the Exchange Act and are not required to provide information required under this item.

 

ITEM 4 - CONTROLS AND PROCEDURES

 

With the change in the management, this Company is contracting to receive the administrative support and is planning to provide adequate controls and procedures in place in due course.

 

For the current quarter, the Company had few transactions. The book-keeping and the financial statement preparations were handled by qualified professionals and hence this management believes that there are adequate controls and procedures for the current period covered by this report which are effective to ensure that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC s rules and forms and (ii) accumulated and communicated to the Company’s management, as appropriate to allow timely decisions regarding disclosure. It has been determined by the Company’s management that the Company has adequate segregation of duties consistent with control objectives and has also adapted various accounting policies in accounting and financial reporting with respect to the requirements and application of GAAP and SEC requirements. The Company has effective controls over the financial disclosure and reporting processes.

 

Management s Annual Report on Internal Control over Financial Reporting

 

The management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. The system of internal control over financial reporting prevent or detect misstatements. All projections such as evaluation of effectiveness to future periods, are provided by well experienced professionals, while the same can be subject to inherent risks such as changing conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

The management conducts quarterly evaluation of the effectiveness of internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework (2013). Based on its evaluation, the Company is constantly requiring the experts to improve the system so as to remove any material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company s annual or interim financial statements will not be prevented or detected on a timely basis.

 

The material weakness is eliminated by segregation of duties in financial reporting, as our financial reporting and all accounting functions are performed by experts with adequate oversight by a professional with accounting expertise.

 

In general, there have been no changes in our system of internal controls over financial reporting during the current period of reporting, while the management has been constantly reviewing and eliminating any area of material weakness. The management assertion is adequate internal control over financial reporting.

  

 
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PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Silverland Finance Ltd, Platinum Investment Corporation, Lin Zhou, Jin Wang, and Li Jun (collectively known as plaintiffs) have filed a law suit on (i) Wall007, LLC, (ii) Wall009, LLC, (iii) Timothy Barton, (iv) Sada Cumber, and (v) Carnegie Development, Inc. (collectively known as defendants) on November 15, 2019 in the 44th Judicial District of Texas in Dallas County, Texas, Case No DC-19-18361 and on 25th November, 2019, this company was served with the notice of the court case. On December 30, 2019 this company filed its (i) Plea in Abatement; (ii) Rule 91A Motion to Dismiss Plaintiff’s Original Petition (“Motion to Dismiss”); (iii) Special Exceptions and Original Answer denying the causes of action asserted against CDI, and (iv) Motion for Protective Order and Motion to Stay Discovery Pre-Trial Proceedings. Upon Plaintiffs filing an Amended Petition thereafter, this company withdrew the Motion to Dismiss on February 5, 2020. No other material events occurred in this case as on 21st March 2020.

 

There are no other pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, or any owner of record or beneficially of more than 5% of any class of voting securities of the Company, is a party.

   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On September 30, 2020, Carnegie Development, Inc. (the “Issuer” or the “Company”) issued an aggregate of 21,786 Shares of its Series I Cumulative Convertible Preferred Stock to five different entities as part of the acquisition of 99% of six different limited liability companies, which are all Special Purpose Entities (“SPE”) engaged in real estate development activities in Texas or Florida, including multifamily, individual lot development and home building. Each entity receiving Shares of Series I Cumulative Convertible Preferred Stock executed and delivered a Subscription Agreement and Letter of Investment Intent, and the Shares were issued in reliance upon the exemption under Section 4(2) of the Securities Act of 1933.

    

Item 5. Other Information:

 

On September 30, 2020, the Company acquired 99% of the membership interest in each of the following entities from five other entities in exchange for 21,786 Shares of Series I Cumulative Convertible Preferred Stock and Promissory Notes in the original Stated Principal Amount of $9,755,888:

 

●    126 Villita, LLC, which is developing St. Mary’s Tower in San Antonio, Bexar County, Texas, a 24-story building with steel frame, stucco and glass exterior, with a flat roof; the building, when completed, will have 186,500 net rentable square feet with level 1 for office space, levels 2-6 for parking, level 7 for a pool and social deck, and levels 8-24 including 250 residential units. The building is located on a 0.492-acre tract of land in the city of San Antonio. The budget for the development is $62,100,000.

 

●    D4AVEG, LLC is developing 280 housing units consisting of 238,968 square feet on 21.68 acres located in Winter Haven, Polk County, Florida. The development budget is $40,770,000 as a non-HUD, multifamily project.

 

●    D4KL, LLC is developing 226 housing units on 16.17 acres of land located in Killeen, Texas. The development budget is $46,900,000.

 

●    Mansions Apartments at Marine Creek LLC is developing 638 housing units on a 54.166-acre tract of land located in Tarrant County, Texas. Construction is in three separate phases, and in each phase, the development budget is approximately $42,000,000.

 

●    Ridgeview Additions LLC is a land development project on a 15.004-acre tract of land located in Venus, Johnson County, Texas, which ultimately will create 54 lots, with an average lot size of 56 feet by 108 feet, for an expected sale price of $955 per front foot ($53,480 per lot). 

 

●    Villita Towers LLC is developing 226 multifamily housing units on a 0.35-acre tract of land in San Antonio, Bexar County, Texas, with an estimated loan component of $66,000,000.

 

All of the foregoing items are in varying stages of development from initial plans to near completion.

 

 
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Item 6. Exhibits.

 

Exhibit No.

 

Description

31.1

 

Certification of Principal Executive Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2

 

Certification of Principal Financial Officer as required by Rule 13a-14 or 15d-14 of the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

 

Certification Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 0f of 2002*

________

*Filed Herewith

 

 
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

Carnegie Development, Inc.

 

Date: November 14, 2020

By:

/s/ Timothy Barton

 

Timothy Barton

President

 

 
20

 

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