PART
II
ITEM
5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common
Stock
Our
common stock is currently quoted on the Over The Counter Bulletin Board under symbol MPGS. Prior to January 14, 2013, our common
stock was quoted under the symbol APCN.
The
range of high and low bid quotations by quarter from January 1, 2016 through December 31, 2016 is listed below. The quotations
are taken from the OTC Bulletin Board. They reflect inter-dealer prices, without retail mark-up, mark-down or commission, and
may not necessarily represent actual transactions.
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Period Ended:
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High
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Low
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October
1, 2016 to December 31, 2016
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0.03
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0.02
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July 1, 2016
to September 30, 2016
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0.02
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0.02
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April 1,
2016 to June 30, 2016
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0.02
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0.02
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January 1,
2016 to March 31, 2016
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0.05
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0.02
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Record
Holders
As
at April 30, 2017, an aggregate of 102,550,000 shares of our common stock were issued and outstanding.
Recent
Sales of Unregistered Securities
In
October 2010, we issued 10,000,000 shares of common stock to our director. Mr. Ijaz purchased such 10,000,000 shares at
a purchase price of $0.001 per share, for an aggregate purchase price of $9,704 pursuant to the exemption from registration provided
by Section 4(2) of the Securities Act of 1933.
After
the sale of 10,000,000 shares to Mr. Ijaz, the Company, in October 2010, sold an aggregate of 4,050,000 shares of common stock
to 9 individual purchasers, each of whom paid $0.002 per share, for an aggregate purchase price of $7,903 pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act of 1933.
Between
February 2012, and June 2012 the Company sold 500,000 shares to 24 individual purchasers at $0.20 for proceeds of $100,000, pursuant
to the exemption from registration provided by Section 4(2) of the Securities Act of 1933.
On
September 8, 2014, the company issued 250,000 shares of its common stock in a private placement to certain accredited investors
at $0.002 per share or $500 in cash. For the issuance and sale of the stock, the Company relied upon the exemption from registration
provided under Regulation D of the Securities Act of 1933, as amended.
Also
on September 8, 2014, the Company issued 2,250,000 shares of its common stock in a private placement to certain foreign investors
at a purchase price of $0.002 per share or $4,500 in cash. For the issuance and sale of the stock, the company relied upon the
exemption from registration provided under Regulation S of the Securities Act of 1933, as amended.
On
September 11, 2014, the Company issued 37,500,000 shares of its common stock to two individuals and one entity in exchange for
services valued at $0.002 per share. For the issuance and sale of the stock, the company relied upon the exemption from registration
provided under Regulation S of the Securities Act of 1933, as amended.
On
November 6, 2014, the Company issued 1,800,000 shares of its common stock in a private placement to two investors at a purchase
price of $0.005 per share or $90,000 in cash. For the issuance and sale of the stock, the company relied upon the exemption from
registration provided under Regulation S of the Securities Act of 1933, as amended.
On
June 12, 2015, the Company issued 30,000,000 shares of its common stock to an employee in exchange for services valued at $0.005
per share. For the issuance and sale of the stock, the company relied upon the exemption from registration provided under Regulation
S of the Securities Act of 1933, as amended.
Re-Purchase
of Equity Securities
None.
Dividends
Historically,
we have not paid any dividends to the holders of our common stock and we do not expect to pay any such dividends in the foreseeable
future as we expect to retain our future earnings for use in the operation and expansion of our business
Securities
Authorized for Issuance Under Equity Compensation Plans
None.
ITEM
6. SELECTED FINANCIAL DATA
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
the information under this item.
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This
Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended (the
“
Securities Act
”
)
and Section 21E of the Securities Exchange Act of 1934, as amended (the
“
Exchange
Act
”
). These forward-looking statements are not historical facts but rather are
based on current expectations, estimates and projections. We may use words such as
“
anticipate,
”
“
expect,
”
“
intend,
”
“
plan,
”
“
believe,
”
“
foresee,
”
“
estimate
”
and variations of these words and similar expressions to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our
control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You
should read this report completely and with the understanding that actual future results may be materially different from what
we expect. The forward-looking statements included in this report are made as of the date of this report and should be evaluated
with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even
though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as
a result of new information, future events or otherwise.
Overview
We
were incorporated in the State of Nevada on September 17, 2010 under the name Alliance Petroleum Corporation. On January 14, 2013,
the Company’s name changed to Malaysia Pro-Guardians Security Management Corporation. The Company engages in securities
service upon formation of PMSM.
On
August 13, 2014, we completed the process of establishing a wholly owned subsidiary company, Proguard Management Services Malaysia
SDN. BHD., in Malaysia (“PMSM”). PMSM’s scope of business is: (1) security consultation (2) copyright consultation,
copyright and trademarks investigation and enforcement and trademarks consultation. By establishing this subsidiary in Malaysia,
we plan to engage in the business of providing security consultation, copyright consultation, copyright and trademarks investigation
and enforcement and trademarks consultation services in Malaysia.
During
the year of 2014, we got $20,000 sales from our security consultation business. However, beginning from 2015,our sole client ended
the cooperation with us and we have not sought new client to develop our business. The Company’s officers and directors
have determined that the Company lacks the resources to properly develop the Company’s Previous business model, therefore,
the Company’s officers and directors have determined to seek a merger or an acquisition with a larger, better capitalized
entity: “to enhance the distribution to creditors” and bring greater value to our shareholders. Therefore, as of the
date hereof, the Company can be defined as a "shell" company.
Results
of operations
Our
financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be
unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We
expect to raise additional capital through, among other things, the sale of equity or debt securities.
The
Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015
For
the year ended December 31, 2016 and 2015, we generated no revenue.
For
the year ended December 31, 2016, we incurred total operating expenses of $3,722, representing a decrease of $169,296 compared
to the year ended December 31, 2015. The decrease was primarily a result of the decreased officer salary $150,000 share based
compensation, the decreased general and administrative expenses $15,574.
The
weighted average number of shares outstanding were 102,550,000 and 89,152,000 for the year ended December 31, 2016 and 2015.
Liquidity
and Capital Resources
At
December 31, 2016, the Company had cash of $0 and total assets of $0.
The
Company had a negative working capital of $5,151 and $1,429 at December 31, 2016 and 2015.
Working
Capital
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December
31,
2016
$
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December
31,
2015
$
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Current Assets
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—
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881
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Current Liabilities
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5,151
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2,310
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Working Capital(Deficit)
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(5,151
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)
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(1,429
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)
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Cash
Flows
|
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The
year
ended
December
31,
2016
$
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The
year ended
December
31,
2015
$
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Cash Flows from (used in) Operating Activities
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(562
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)
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(9,286
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)
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Cash Flows from (used in) Investing Activities
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—
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—
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Cash Flows from (used in) Financing Activities
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(319
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)
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505
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Net Increase (decrease) in Cash During year
|
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(881
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)
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(8,781
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)
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Cash
flow from Operating Activities
During
the year ended December 31, 2016, the Company used $562 of cash for operating activities, as compared to the $9,286 during the
year ended December 31, 2015. The increase of cash flow is mainly due to the increase $165,574 of the net income and partly offset
by the decrease $150,000 of Share based compensation and decrease $6,850 of the changes in operating assets and liabilities.
Cash
flow from Investing Activities
During
the period ended December 31, 2016 and 2015, the Company did not have cash from any investing activities.
Cash
flow from Financing Activities
During
the year ended December 31, 2016, the Company returned $319 to its shareholder.
During
the year ended December 31, 2015, the Company received $505 proceeds from its shareholder.
Plan
of Operation and Funding
We
expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuance
of securities. Our working capital requirements are expected to increase in line with the growth of our business.
Existing
working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations
over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations
to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management
anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii)
developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses
with further issuance of securities, and debt issuance. Thereafter, we expect we will need to raise additional capital and generate
revenues to meet long-term operating requirements. Additional issuance of equity or convertible debt securities will result in
dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common
stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are
not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations. We will have to raise additional funds in the next
twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such
funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock.
We have and will continue to seek to obtain short-term loans from our directors, although no future arrangement for additional
loans has been made. We do not have any agreements with our directors concerning these loans. We do not have any arrangements
in place for any future equity financing.
Going
Concern
We
have not attained profitable operations and are dependent upon obtaining financing to fund our business operations. For these
reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will
be able to continue as a going concern without further financing.
Future
Financings
We
will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of
additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional
sales of the equity securities or arrange for debt or other financing to fund our business operations.
Off-Balance
Sheet Arrangements
We
have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources that are material to stockholders.
Summary
of Significant Accounting Policies
The
Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness
of accounting policies and their application. Critical accounting policies and practices are those that are both most important
to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective,
or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted
accounting principles.
Basis
of Presentation
The
Company reports revenues and expenses using the accrual method of accounting for financial and tax reporting purpose. These financial
statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting
principles.
Use
of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
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 affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses
during the reporting period(s).
Critical
accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and
judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact
of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates
and assumptions affecting the financial statements were:
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(i)
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Assumption
as a going concern
: Management assumes that the Company will continue as a going
concern, which contemplates continuity of operations, realization of assets, and liquidation
of liabilities in the normal course of business.
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(ii)
|
Allowance
for doubtful accounts
: Management’s estimate of the allowance for doubtful
accounts is based on historical sales, historical loss levels, and an analysis of the
collectability of individual accounts; and general economic conditions that may affect
a client’s ability to pay. The Company evaluated the key factors and assumptions
used to develop the allowance in determining that it is reasonable in relation to the
financial statements taken as a whole.
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(iii)
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Valuation
allowance for deferred tax assets
: Management assumes that the realization of the
Company’s net deferred tax assets resulting from its net operating loss (“NOL”)
carry–forwards for Federal income tax purposes that may be offset against future
taxable income was not considered more likely than not and accordingly, the potential
tax benefits of the net loss carry-forwards are offset by a full valuation allowance.
Management made this assumption based on (a) the Company has incurred recurring losses,
(b) general economic conditions, and (c) its ability to raise additional funds to support
its daily operations by way of a public or private offering, among other factors.
|
These
significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached
to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management
bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the
financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Management
regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes
in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those
estimates are adjusted accordingly.
Actual
results could differ from those estimates.
Principles
of Consolidation
The
Company applies the guidance of Topic 810
“Consolidation”
of the FASB Accounting Standards Codification to
determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all
entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest
with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely
to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee.
Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting
interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent
of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also
exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.
The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.
The
Company's consolidated subsidiaries and/or entities are as follows:
|
Name
of consolidated subsidiary or entity
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State
or other jurisdiction of incorporation or organization
|
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Date
of incorporation or formation
(date
of acquisition, if applicable)
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Attributable
interest
|
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Proguard Management Services Malaysia SDN. BHD
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Kuala
Lumpur, Malaysia
|
|
August 13,
2014
|
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100
|
%
|
The
consolidated financial statements include all accounts of the Company and its consolidated subsidiaries and/or entities as of
the reporting period ending date(s) and for the reporting period(s).
All
inter-company balances and transactions have been eliminated.
Related
Parties
The
Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure
of related party transactions.
Pursuant
to Section 850-10-20 the related parties include a. affiliates (“Affiliate” means, with respect to any specified
Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under
common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act) of the Company;
b. entities for which investments in their equity securities would be required, absent the election of the fair value option
under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing
entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the
trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to
an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other
parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership
interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting
parties might be prevented from fully pursuing its own separate interests.
The
financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense
allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other
information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar
amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the
method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the
date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Stock-Based
Compensation for Obtaining Employee Services
The
Company accounts for share-based payment transactions issued to employees under the guidance of the Topic 718 Compensation—Stock
Compensation of the FASB Accounting Standards Codification (“ASC Topic 718”).
Pursuant
to ASC Section 718-10-20 an employee is an individual over whom the grantor of a share-based compensation award exercises or has
the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in
case law and currently under U.S. Internal Revenue Service (“IRS”) Revenue Ruling 87-41. A non-employee director does
not satisfy this definition of employee. Nevertheless, non-employee directors acting in their role as members of a board of directors
are treated as employees if those directors were elected by the employer’s shareholders or appointed to a board position
that will be filled by shareholder election when the existing term expires. However, that requirement applies only to awards granted
to non-employee directors for their services as directors. Awards granted to non-employee directors for other services shall be
accounted for as awards to non-employees.
Pursuant
to ASC Paragraphs 718-10-30-2 and 718-10-30-3 a share-based payment transaction with employees shall be measured based on the
fair value of the equity instruments issued and an entity shall account for the compensation cost from share-based payment transactions
with employees in accordance with the fair value-based method, i.e., the cost of services received from employees in exchange
for awards of share-based compensation generally shall be measured based on the grant-date fair value of the equity instruments
issued or the fair value of the liabilities incurred/settled.
Pursuant
to ASC Paragraphs 718-10-30-6 and 718-10-30-9 the measurement objective for equity instruments awarded to employees is to estimate
the fair value at the grant date of the equity instruments that the entity is obligated to issue when employees have rendered
the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments (for example,
to exercise share options). That estimate is based on the share price and other pertinent factors, such as expected volatility,
at the grant date. As such, the fair value of an equity share option or similar instrument shall be estimated using a valuation
technique such as an option pricing model. For this purpose, a similar instrument is one whose fair value differs from its intrinsic
value, that is, an instrument that has time value.
If
the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s
common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares
are thinly traded the use of share prices established in its most recent private placement memorandum (“PPM”), or
weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares
could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
Pursuant
to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the
same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or
model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:
a.
The exercise price of the option.
b.
The expected term of the option, taking into account both the contractual term of the option and the effects of employees’
expected exercise and post-vesting employment termination behavior: The expected life of options and similar instruments represents
the period of time the option and/or warrant are expected to be outstanding. Pursuant to paragraph 718-10-S99-1, it may be appropriate
to use the
simplified method
,
i.e., expected term = ((vesting term + original contractual term) / 2)
, if (i) A company
does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the
limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share
option grants or the types of employees that receive share option grants such that its historical exercise data may no longer
provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural
changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate
expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the
company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
c.
The current price of the underlying share.
d.
The expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25
a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities
for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities
of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider
characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification
that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities
of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly
traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations
as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between
the bid and asked quotes and lack of consistent trading in the market. The Company uses the average historical volatility of the
comparable companies over the expected term of the share options or similar instruments as its expected volatility.
e.
The expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the
Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of
the share options and similar instruments.
f.
The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option
on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon
yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual
term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S.
Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the mod
Pursuant
to ASC Paragraphs 718-10-30-11 and 718-10-30-17 a restriction that stems from the forfeitability of instruments to which employees
have not yet earned the right, such as the inability either to exercise a non-vested equity share option or to sell non-vested
shares, is not reflected in estimating the fair value of the related instruments at the grant date. Instead, those restrictions
are taken into account by recognizing compensation cost only for awards for which employees render the requisite service and a
non-vested equity share or non-vested equity share unit awarded to an employee shall be measured at its fair value as if it were
vested and issued on the grant date.
Pursuant
to ASC Paragraphs 718-10-35-2 and 718-10-35-3 the compensation cost for an award of share-based employee compensation classified
as equity shall be recognized over the requisite service period, with a corresponding credit to equity (generally, paid-in capital).
The requisite service period is the period during which an employee is required to provide service in exchange for an award, which
often is the vesting period. The total amount of compensation cost recognized at the end of the requisite service period for an
award of share-based compensation shall be based on the number of instruments for which the requisite service has been rendered
(that is, for which the requisite service period has been completed). An entity shall base initial accruals of compensation cost
on the estimated number of instruments for which the requisite service is expected to be rendered. That estimate shall be revised
if subsequent information indicates that the actual number of instruments is likely to differ from previous estimates. The cumulative
effect on current and prior periods of a change in the estimated number of instruments for which the requisite service is expected
to be or has been rendered shall be recognized in compensation cost in the period of the change. Previously recognized compensation
cost shall not be reversed if an employee share option (or share unit) for which the requisite service has been rendered expires
unexercised (or unconverted).
Under
the requirement of ASC Paragraph 718-10-35-8 the Company made a policy decision to recognize compensation cost for an award with
only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the
entire award.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
the information under this item.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See
the financial statements annexed to this annual report immediately after the signature page of this Form 10-K.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On
July 25, 2014, the board of directors of the Company dismissed the engagement of M&K CPAS, PLLC (
“
M&K
”
)
as the Company's principal accountant.M&K’s report on the Company’s financial statements for the years ended December
31, 2013 and December 31, 2012 stated that the Company
’
s recurring losses raise
substantial doubt about the Company
’
s ability to continue as a going concern. Except
for the foregoing, M&K
’
s report on the financial statements of the Company
as of and for the years ended December 31, 2013 and December 31, 2012 did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to audit scope, procedure or accounting principles.
There
were no disagreements between the Company and M&K, for the two most recent fiscal years and any subsequent interim period
through July 25, 2014 (date of dismissal) on any matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which, if not resolved to the satisfaction of M&K, would have caused them to make reference
to the subject matter of the disagreement in connection with its report.
(b)
On July 25, 2014, the Company engaged Li and Company, PC (
“
Li
”
)
as its principal accountant to audit the Company's financial statements. During the Company's two most recent fiscal years or
subsequent interim period, the Company has not consulted with the entity of Li regarding the application of accounting principles
to a specific transaction, Either completed or proposed, or the type of audit opinion that might be rendered on the Company's
financial statements, nor did the entity of Li provide advice to the Company, either written or oral, that was an important factor
considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue.Further, during the
Company's two most recent fiscal years or subsequent interim period, the Company has not consulted the entity of Li on any matter
that was the subject of a disagreement or a reportable event.
(c)
On April 1, 2015, concurrent with the dismissal of Li, the Company, upon the board of directors
’
approval, engaged McCormack, Su & Company Inc. (
“
McCormack, Su &
Co.
”
) as its new independent registered public accounting firm to audit and review
the Company
’
s financial statements effective immediately. During the two most recent
years ended December 31, 2012 and 2013, and any subsequent period through the date hereof prior to the engagement of McCormack,
Su & Co., neither the Company, nor someone on its behalf, has consulted McCormack, Su & Co. regarding:(i) Either; the
application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that
might be rendered on the Company
’
s financial statements, and either a written report
was provided to the Company or oral advice was provided that the new accountant concluded was an important factor considered by
the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or(ii)Any matter that was either
the subject of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K or a reportable event as described in paragraph
304(a)(1)(v) of Regulation S-K.
(d)
On April 8, 2016, concurrent with the dismissal of McCormack, Su & Co., the Company, upon the board of directors’approval,
engaged Anton & Chia LLP. (
“
Anton & Chia
”
)
as its new independent registered public accounting firm to audit and review the Company
’
s
financial statements effective immediately. During the two most recent years ended December 31, 2014 and 2015, and any subsequent
period through the date hereof prior to the engagement of Anton & Chia, neither the Company, nor someone on its behalf, has
consulted Anton & Chia. regarding:(i)Either; the application of accounting principles to a specified transaction, either completed
or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and either a written
report was provided to the Company or oral advice was provided that the new accountant concluded was an important factor considered
by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or(ii) Any matter that was
either the subject of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K or a reportable event as described
in paragraph 304(a)(1)(v) of Regulation S-K.
(e)
On May 1, 2017, concurrent with the dismissal of Anton & Chia, the Company, upon the board of directors’approval, engaged
BF Borgers CPA PC as its new independent registered public accounting firm to audit and review the Company’s financial statements
effective immediately. During the two most recent years ended December 31, 2015 and 2016, and any subsequent period through the
date hereof prior to the engagement of BF Borgers CPA PC neither the Company, nor someone on its behalf, has consulted BF Borgers
CPA PC regarding:(i)Either; the application of accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Company
’
s financial
statements, and either a written report was provided to the Company or oral advice was provided that the new accountant concluded
was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting
issue; or(ii)Any matter that was either the subject of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K
or a reportable event as described in paragraph 304(a)(1)(v) of Regulation S-K.
ITEM
9A. CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures
Based
on an evaluation as of the date of the end of the period covered by this report, our Chief Executive Officer and Chief Financial
Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as
required by Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were not effective as of the end of the period covered by this report to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified by the SEC’s rules and forms.
Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated
to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required
disclosure.
Management’s
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f)
promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting
as of December 31, 2016. In making this assessment, our management, including our principle executive officer and principle financial
officer, used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO")
in
Internal Control-Integrated Framework
. Our management, including our principle executive officer and principle
financial officer, has concluded that, as of December 31, 2016, our internal control over financial reporting is not effective
based on these criteria.
We
have identified the following material weaknesses:
1.
As of December 31, 2016, we did not maintain effective controls over the control environment. Specifically, we have not developed
and effectively communicated to our employees with our accounting policies and procedure. This has resulted in inconsistent practices.
Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee
financial experts as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect
across the organization, management has determined that these circumstances constitute a material weakness.
2.
As of December 31, 2016, we did not maintain effective controls over financial statement disclosure. Specifically, controls were
not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly,
management has determined that this corn deficiency constitutes a material weakness.
Because
of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial
reporting as of December 31, 2016, based on the criteria established in “Internal Control-Integrated Framework” issued
by COSO.
The
management has determined that our internal control over financial reporting was subject to the material weaknesses of inadequate
staffing and supervision within the accounting operations of our company: we do not have adequate staff responsible for accounting
functions and this weakness prevents us from segregating duties within our internal control system. The inadequate segregation
of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters
or could lead to a failure to perform timely and effective reviews.
Changes
in Internal Control and Financial Reporting
Our
management, including our principal executive officer and principal financial officer, has also evaluated our internal control
over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly
affect those controls subsequent to the date of our last evaluation.
The
Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's
registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
Continuing
Remediation Efforts to address deficiencies in Company’s Internal Control over Financial Reporting
Once
the Company is engaged in a business of merit and has sufficient personnel available, then our Board of Directors, in particular
and in connection with the aforementioned deficiencies, will establish the following remediation measures:
|
|
|
|
1.
|
Our Board of Directors will nominate an audit
committee or a financial expert on our Board of Directors in the next fiscal year.
|
|
|
|
|
2.
|
We will appoint additional personnel to assist
with the preparation of the Company’s monthly financial reporting, including preparation of the monthly bank reconciliations.
|
ITEM
9B. OTHER INFORMATION
None.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2016
Note
1 - Organization and Basis of presentation
Organization
Malaysia
Pro-Guardians Security Management Corporation (the “Company”) was incorporated on September 17, 2010 under the laws
of the State of Nevada,with former name Alliance Petroleum Corporation.
On
October 23, 2012, Khurram Ijaz (“Seller”), who is the controlling shareholder of the Company, sold 10,000,000 shares
of common stock of the Company to Chin Yung Kong (“Purchaser”) for an aggregated price of $ 50,000.00.
On
January 14, 2013, Alliance changed its name to Malaysia Pro-Guardians Security Management Corporation.
On
August 13, 2014, the Company formed Proguard Management Services Malaysia SDN. BHD ("PMSM"), a wholly-owned subsidiary
under the laws of Malaysia. PMSM planned to engage in the security management service but failed to develop.
On
March 8, 2015, Chin Yung Kong resigned as chief financial officer of the Company. On March 9, 2015, the Company’s board
of directors appointed Hua Fung Chin as chief executive officer and chief financial officer.
Basis
of presentation
The
accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission ("SEC").
In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected
herein. The Company has elected a fiscal year ending on December 31.
Note
2 - Significant and Critical Accounting Policies and Practices
The
Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness
of accounting policies and their application. Critical accounting policies and practices are those that are both most important
to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective,
or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted
accounting principles.
Basis
of Presentation
The
Company reports revenues and expenses using the accrual method of accounting for financial and tax reporting purpose. These financial
statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting
principles.
Use
of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
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 affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses
during the reporting period(s).
Critical
accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and
judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact
of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates
and assumptions affecting the financial statements were:
|
|
(iv)
|
Assumption
as a going concern
: Management assumes that the Company will continue as a going
concern, which contemplates continuity of operations, realization of assets, and liquidation
of liabilities in the normal course of business.
|
|
|
(v)
|
Allowance
for doubtful accounts
: Management’s estimate of the allowance for doubtful
accounts is based on historical sales, historical loss levels, and an analysis of the
collectability of individual accounts; and general economic conditions that may affect
a client’s ability to pay. The Company evaluated the key factors and assumptions
used to develop the allowance in determining that it is reasonable in relation to the
financial statements taken as a whole.
|
|
|
(vi)
|
Valuation
allowance for deferred tax assets
: Management assumes that the realization of the
Company’s net deferred tax assets resulting from its net operating loss (“NOL”)
carry–forwards for Federal income tax purposes that may be offset against future
taxable income was not considered more likely than not and accordingly, the potential
tax benefits of the net loss carry-forwards are offset by a full valuation allowance.
Management made this assumption based on (a) the Company has incurred recurring losses,
(b) general economic conditions, and (c) its ability to raise additional funds to support
its daily operations by way of a public or private offering, among other factors.
|
These
significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached
to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management
bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the
financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Management
regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes
in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those
estimates are adjusted accordingly.
Actual
results could differ from those estimates.
Principles
of Consolidation
The
Company applies the guidance of Topic 810
“Consolidation”
of the FASB Accounting Standards Codification to
determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all
entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest
with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely
to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee.
Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting
interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent
of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also
exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree.
The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.
The
Company's consolidated subsidiaries and/or entities are as follows:
|
Name
of consolidated subsidiary or entity
|
|
State
or other jurisdiction of incorporation or organization
|
|
Date
of incorporation or formation
(date
of acquisition, if applicable)
|
|
Attributable
interest
|
|
|
|
|
|
|
|
|
|
|
|
Proguard Management Services Malaysia SDN. BHD
|
|
Kuala
Lumpur, Malaysia
|
|
August 13,
2014
|
|
|
100
|
%
|
The
consolidated financial statements include all accounts of the Company and its consolidated subsidiaries and/or entities as of
the reporting period ending date(s) and for the reporting period(s).
All
inter-company balances and transactions have been eliminated.
Fair
Value of Financial Instruments
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency
and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy
which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
|
Level 1
|
Quoted market prices available in
active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
|
Level 2
|
Pricing inputs other than quoted prices in active
markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
|
|
|
|
|
Level 3
|
Pricing inputs that are generally observable inputs
and not corroborated by market data.
|
Financial
assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, accounts payable,
accrued expenses and other current liabilities approximate their fair values because of the short maturity of these instruments.
Transactions
involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive,
free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the
related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such
representations can be substantiated.
Related
Parties
The
Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure
of related party transactions.
Pursuant
to Section 850-10-20 the related parties include a. affiliates (“Affiliate” means, with respect to any specified
Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under
common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act) of the Company;
b. entities for which investments in their equity securities would be required, absent the election of the fair value option
under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing
entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the
trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to
an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other
parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership
interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting
parties might be prevented from fully pursuing its own separate interests.
The
financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense
allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other
information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar
amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the
method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the
date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitment
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 un-asserted claims that may result in such proceedings, the Company evaluates the perceived
merits of any legal proceedings or un-asserted 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 potential 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.
Revenue
Recognition
The
Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes
revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all
of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably
assured.
Stock-Based
Compensation for Obtaining Employee Services
The
Company accounts for share-based payment transactions issued to employees under the guidance of the Topic 718 Compensation—Stock
Compensation of the FASB Accounting Standards Codification (“ASC Topic 718”).
Pursuant
to ASC Section 718-10-20 an employee is an individual over whom the grantor of a share-based compensation award exercises or has
the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in
case law and currently under U.S. Internal Revenue Service (“IRS”) Revenue Ruling 87-41. A non-employee director does
not satisfy this definition of employee. Nevertheless, non-employee directors acting in their role as members of a board of directors
are treated as employees if those directors were elected by the employer’s shareholders or appointed to a board position
that will be filled by shareholder election when the existing term expires. However, that requirement applies only to awards granted
to non-employee directors for their services as directors. Awards granted to non-employee directors for other services shall be
accounted for as awards to non-employees.
Pursuant
to ASC Paragraphs 718-10-30-2 and 718-10-30-3 a share-based payment transaction with employees shall be measured based on the
fair value of the equity instruments issued and an entity shall account for the compensation cost from share-based payment transactions
with employees in accordance with the fair value-based method, i.e., the cost of services received from employees in exchange
for awards of share-based compensation generally shall be measured based on the grant-date fair value of the equity instruments
issued or the fair value of the liabilities incurred/settled.
Pursuant
to ASC Paragraphs 718-10-30-6 and 718-10-30-9 the measurement objective for equity instruments awarded to employees is to estimate
the fair value at the grant date of the equity instruments that the entity is obligated to issue when employees have rendered
the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments (for example,
to exercise share options). That estimate is based on the share price and other pertinent factors, such as expected volatility,
at the grant date. As such, the fair value of an equity share option or similar instrument shall be estimated using a valuation
technique such as an option pricing model. For this purpose, a similar instrument is one whose fair value differs from its intrinsic
value, that is, an instrument that has time value.
If
the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s
common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares
are thinly traded the use of share prices established in its most recent private placement memorandum (“PPM”), or
weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares
could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
Pursuant
to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the
same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or
model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:
a.
The exercise price of the option.
b.
The expected term of the option, taking into account both the contractual term of the option and the effects of employees’
expected exercise and post-vesting employment termination behavior: The expected life of options and similar instruments represents
the period of time the option and/or warrant are expected to be outstanding. Pursuant to paragraph 718-10-S99-1, it may be appropriate
to use the
simplified method
,
i.e., expected term = ((vesting term + original contractual term) / 2)
, if (i) A company
does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the
limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share
option grants or the types of employees that receive share option grants such that its historical exercise data may no longer
provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural
changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate
expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the
company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
c.
The current price of the underlying share.
d.
The expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25
a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities
for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities
of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider
characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification
that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities
of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly
traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations
as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between
the bid and asked quotes and lack of consistent trading in the market. The Company uses the average historical volatility of the
comparable companies over the expected term of the share options or similar instruments as its expected volatility.
e.
The expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the
Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of
the share options and similar instruments.
f.
The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option
on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon
yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual
term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S.
Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the mod
Pursuant
to ASC Paragraphs 718-10-30-11 and 718-10-30-17 a restriction that stems from the forfeitability of instruments to which employees
have not yet earned the right, such as the inability either to exercise a non-vested equity share option or to sell non-vested
shares, is not reflected in estimating the fair value of the related instruments at the grant date. Instead, those restrictions
are taken into account by recognizing compensation cost only for awards for which employees render the requisite service and a
non-vested equity share or non-vested equity share unit awarded to an employee shall be measured at its fair value as if it were
vested and issued on the grant date.
Pursuant
to ASC Paragraphs 718-10-35-2 and 718-10-35-3 the compensation cost for an award of share-based employee compensation classified
as equity shall be recognized over the requisite service period, with a corresponding credit to equity (generally, paid-in capital).
The requisite service period is the period during which an employee is required to provide service in exchange for an award, which
often is the vesting period. The total amount of compensation cost recognized at the end of the requisite service period for an
award of share-based compensation shall be based on the number of instruments for which the requisite service has been rendered
(that is, for which the requisite service period has been completed). An entity shall base initial accruals of compensation cost
on the estimated number of instruments for which the requisite service is expected to be rendered. That estimate shall be revised
if subsequent information indicates that the actual number of instruments is likely to differ from previous estimates. The cumulative
effect on current and prior periods of a change in the estimated number of instruments for which the requisite service is expected
to be or has been rendered shall be recognized in compensation cost in the period of the change. Previously recognized compensation
cost shall not be reversed if an employee share option (or share unit) for which the requisite service has been rendered expires
unexercised (or unconverted).
Under
the requirement of ASC Paragraph 718-10-35-8 the Company made a policy decision to recognize compensation cost for an award with
only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the
entire award.
Equity
Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services
The
Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under the guidance
of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).
Pursuant
to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee
enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments),
then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement
date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement
is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized
as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to
ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return
for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement
for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such
an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof)
of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in
which equity instruments are transferred to other than employees in exchange for goods or services.
Pursuant
to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable
by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee
achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and
in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of
paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock
option that the counterparty has the right to exercise expires unexercised.
Pursuant
to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with nonemployees 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 issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement
assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment
for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which
the counterparty's performance is complete. If the Company’s common shares are traded in one of the national exchanges the
grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued,
however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most
recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate
than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid
and asked quotes and lack of consistent trading in the market.
Pursuant
to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the
same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or
model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:
a.
The exercise price of the option.
b.
The expected term of the option, taking into account both the contractual term of the option and the effects of employees’
expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting
Standards Codification the expected term of share options and similar instruments represents the period of time the options and
similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s
expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate
holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded
the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments
as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected
term.
c.
The current price of the underlying share.
d.
The expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25
a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities
for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities
of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider
characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification
that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities
of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly
traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations
as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between
the bid and asked quotes and lack of consistent trading in the market. The Company uses the average historical volatility of the
comparable companies over the expected term of the share options or similar instruments as its expected volatility.
e.
The expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the
Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of
the share options and similar instruments.
f.
The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option
on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon
yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual
term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S.
Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.
Pursuant
to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable
equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received
(that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement
date and no entry should be recorded.
Deferred
Tax Assets and Income Tax Provision
The
Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets
and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred
tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets
will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25
addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the
financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if
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 a position should be measured based
on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section
740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim
periods and requires increased disclosures.
The
estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying
balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred
tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Management
makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous
estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in
these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual
taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Tax
years that remain subject to examination by major tax jurisdictions
The
Company discloses tax years that remain subject to examination by major tax jurisdictions pursuant to the ASC Paragraph 740-10-50-15.
Earnings
per Share
Earnings
per share ("EPS") is the amount of earnings attributable to each share of common stock. For convenience, the term is
used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards
Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available
to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the
period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred
stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned)
from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation
of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect
the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options
or warrants.
Pursuant
to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate
or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and
their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method
unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied.
Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid
stock subscriptions (see paragraph 260–10–55–23). Anti-dilutive contracts, such as purchased put options and
purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants
shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued.
b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the
period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the
number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted
EPS computation.
There
were no contingent shares issuance arrangement, stock options or warrants which could have potentially dilutive effect for the
reporting year ended December 31, 2016 or 2015.
Cash
Flows Reporting
The
Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash
receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions
of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25
of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile
it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and
payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income
that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency
cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held
in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents
and separately provides information about investing and financing activities not resulting in cash receipts or payments in the
period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent
Events
The
Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent
events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant
to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued
when they are widely distributed to users, such as through filing them on EDGAR.
Recently
Issued Accounting Pronouncements
In
May 2014, the FASB issued the FASB Accounting Standards Update No. 2014-09 “
Revenue from Contracts with Customers (Topic
606)” (“ASU 2014-09”).
This
guidance amends the existing FASB Accounting Standards Codification, creating a new Topic 606,
Revenue from Contracts
with Customer.
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services.
To
achieve that core principle, an entity should apply the following steps:
-
Identify the contract(s) with the customer
-
Identify the performance obligations in the
contract
-
Determine the transaction price
-
Allocate the transaction price to the performance
obligations in the contract
-
Recognize revenue when (or as) the entity satisfies
a performance obligations
The
ASU also provides guidance on disclosures that should be provided to enable financial statement users to understand the nature,
amount, timing, and uncertainty of revenue recognition and cash flows arising from contracts with customers. Qualitative
and quantitative information is required about the following:
-
Contracts with customers
–
including revenue and impairments recognized, disaggregation of revenue, and information about contract balances and performance
obligations (including the transaction price allocated to the remaining performance obligations)
-
Significant judgments and changes in judgments
–
determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction
price and amounts allocated to performance obligations
-
Assets recognized from the costs to obtain
or fulfill a contract.
ASU
2014-09 is effective for periods beginning after December 15, 2016, including interim reporting periods within that reporting
period for all public entities. Early application is not permitted.
In
June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.
The
amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards
Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities
from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date
information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a
development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4)
disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the
development stage.
The
amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced
planned principal operations.
Finally,
the amendments remove paragraph 810-10-15-16. Paragraph 810-10-15-16 states that a development stage entity does not meet the
condition in paragraph 810-10-15-14(a) to be a variable interest entity if (1) the entity can demonstrate that the equity invested
in the legal entity is sufficient to permit it to finance the activities that it is currently engaged in and (2) the entity’s
governing documents and contractual arrangements allow additional equity investments.
The
amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for
determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The
amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and
improve the relevance of information provided to financial statement users by requiring the application of the same consolidation
guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision,
and disclosure requirements for a reporting entity that has an interest in an entity in the development stage.
The
amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic
915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public
business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim
periods therein.
Early
application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s
financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon
adoption, entities will no longer present or disclose any information required by Topic 915.
In
June 2014, the FASB issued the FASB Accounting Standards Update No. 2014-12 “
Compensation—Stock Compensation (Topic
718)
:
Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved
after the Requisite Service Period” (“ASU 2014-12”).
The
amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance
target could be achieved after the requisite service period. The Update requires that a performance target that affects
vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target
should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period
in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable
to the period(s) for which the requisite service has already been rendered.
The
amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December
15, 2015. Earlier adoption is permitted.
In
August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15
“Presentation of Financial Statements—Going
Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU
2014-15”).
In
connection with preparing financial statements for each annual and interim reporting period, an entity’s management should
evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s
ability to continue as a going concern within one year after the date that the
financial statements are issued
(or within
one year after the date that the
financial statements are available to be issued
when applicable). Management’s evaluation
should be based on relevant conditions and events that are known and reasonably knowable at the date that the
financial statements
are issued
(or at the date that the
financial statements are available to be issued
when applicable). Substantial doubt
about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate,
indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the
date that the financial statements are issued (or available to be issued). The term
probable
is used consistently with
its use in Topic 450, Contingencies.
When
management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going
concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate
the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is
probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions
or events that raise substantial doubt about the entity’s ability to continue as a going concern.
If
conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial
doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables
users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the
footnotes):
|
|
a.
|
Principal
conditions or events that raised substantial doubt about the entity’s ability to
continue as a going concern (before consideration of management’s plans)
|
|
|
b.
|
Management’s
evaluation of the significance of those conditions or events in relation to the entity’s
ability to meet its obligations
|
|
|
c.
|
Management’s
plans that alleviated substantial doubt about the entity’s ability to continue
as a going concern.
|
If
conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt
is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating
that there is
substantial doubt about the entity’s ability to continue as a going concern
within one year after the
date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information
that enables users of the financial statements to understand all of the following:
|
|
a.
|
Principal
conditions or events that raise substantial doubt about the entity’s ability to
continue as a going concern
|
|
|
b.
|
Management’s
evaluation of the significance of those conditions or events in relation to the entity’s
ability to meet its obligations
|
|
|
c.
|
Management’s
plans that are intended to mitigate the conditions or events that raise substantial doubt
about the entity’s ability to continue as a going concern.
|
The
amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim
periods thereafter. Early application is permitted.
Management
does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material
effect on the accompanying financial statements.
Note
3 – Going Concern
The
Company has elected to adopt early application of Accounting Standards Update No. 2014-15,
“Presentation of Financial
Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a
Going Concern (“ASU 2014-15”)
.
The
Company's consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates
continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As
reflected in the consolidated financial statements, the Company had an accumulated deficit at December 31, 2016, and net cash
used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
The
Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not
be sufficient to support its daily operations. While the Company believes in the viability of its strategy to commence operations
and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability
of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate
sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The
financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts
or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note
4 – Stockholders’ Equity (Deficit)
Shares
Authorized
Upon
formation the total number of shares of all classes of stock which the Company was authorized to issue was Seventy-Five Million
(75,000,000) shares of which Seventy-Five Million (75,000,000) shares shall be Common Stock, par value $0.001 per share.
On
October 9, 2014, the Certificate of change filed pursuant to NRS 78.209. The Company is authorized to issue is Three hundred and
Fifty Million (350,000,000) shares of which Three hundred and Fifty Million (350,000,000) shares shall be Common Stock, par value
$0.001 per share.
Common
Stock
On
September 8, 2014, the company issued 250,000 shares of its common stock in a private placement to certain accredited investors
at $0.002 per share or $500 in cash. For the issuance and sale of the stock, the Company relied upon the exemption from registration
provided under Regulation D of the Securities Act of 1933, as amended.
Also
on September 8, 2014, the Company issued 2,250,000 shares of its common stock in a private placement to certain foreign investors
at a purchase price of $0.002 per share or $4,500 in cash. For the issuance and sale of the stock, the company relied upon the
exemption from registration provided under Regulation S of the Securities Act of 1933, as amended.
On
September 11, 2014, the Company issued 37,500,000 shares of its common stock to two individuals and one entity in exchange for
services valued at $0.002 per share.
On
November 6, 2014, the Company issued 18,000,000 shares of its common stock in a private placement to two investors at
a purchase price of $0.005 per share or $90,000 in cash. The Company received $90,000 in escrow account and paid the
consulting fee of $90,000 thereafter. For the issuance and sale of the stock, the company relied upon the exemption from
registration provided under Regulation S of the Securities Act of 1933, as amended.
On June 12, 2015, the
Company issued 30,000,000 shares of its common stock to an employee in exchange for services valued at $0.005 per share. For the
issuance and sale of the stock, the company relied upon the exemption from registration provided under Regulation S of the Securities
Act of 1933, as amended.
Additional
paid-in capital - sole director and officer
During
the reporting period ended December 31, 2013, Mr. Chin Yung Kong, the Company’s sole director and officer before March 8,
2015, paid $15,000 for the Company’s audit and legal fees, which was booked as additional paid-in capital.
During
the reporting period ended December 31, 2014, Mr. Chin Yung Kong, the Company’s sole director and officer before March 8,
2015, paid $7,925 for the Company’s audit, legal fees and general and administrative expenses, which was booked as additional
paid-in capital.
During
the reporting year ended December 31, 2014, Mr. Chin Yung Kong, the Company’s sole director and officer before March 8,
2015, contributed $5,000 for the Company’s working capital and $1 for formation of subsidiary, which was booked as additional
paid-in capital.
Note
5 – Related Party Transactions
Related
Parties
Related
parties with whom the Company had transactions are:
|
Related
Parties
|
|
Relationship
|
|
|
|
|
|
Mr. Chin Yung
Kong
|
|
Chairman, CEO, significant
stockholder and director before March 8, 2015
|
The
Company returned $319 to its shareholder Mr. Chin Yung Kong during the year of 2016. Mr. Chin Yung Kong paid net $505 on behalf
of the Company for the expense during the year of 2015.
Free
Office Space
The
Company has been provided office space by its Chief Executive Officer at no cost. Management determined that such cost is nominal
and did not recognize the rent expense in its financial statement.
Note
6 – Income tax
Current
tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership
occurs. Therefore, the amount available to offset future taxable income may be limited. The provision for income taxes differs
from the result which would be obtained by applying the statutory income tax rate of 34% to income before income taxes.
At
December 31, 2016 and 2015, deferred tax assets consisted of the following:
|
|
|
December 31,
2016
|
|
December 31,
2015
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
171,176
|
|
|
$
|
169,911
|
|
|
Less: valuation allowance
|
|
|
(171,176
|
)
|
|
|
(169,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
At
December 31, 2016, the Company had an unused net operating loss carry-forward $503,460 that is available to offset future taxable
income.
During
the years ended December 31, 2016 and 2015, the effective tax rate of the Company is reconciled to the U.S. federal statutory
rate, as follows:
|
|
|
2016
|
|
2015
|
|
U.S. federal statutory rate
|
|
|
34
|
%
|
|
|
34
|
%
|
|
Change in valuation allowance
|
|
|
(34
|
%)
|
|
|
(34
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
—
|
|
|
|
—
|
|
Note
7 – Subsequent Events
The
Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued
to determine if they must be reported.
F-18