NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
1. GENERAL
Organization and Business Nature
Western Lucrative Enterprises, Inc. (the “Company”) was incorporated in the State of Iowa on July 14, 2008 and was planning to create an online landscape design, construction, and consulting services platform.
On January 31, 2018, a Stock Purchase Agreement (the “SPA”) was entered by and among Dempsey Mork, Tonbridge, LLC and Magellan Capital Corp. 401K Profit Sharing Plan, as sellers, and Wenjian Liu, as buyer. Pursuant to the SPA, the buyer paid consideration of $325,000 in cash as the sellers. The purchase and sale of 16,930,000 shares of Common Stock as contemplated by the SPA (the “Purchase”) closed on February 12, 2018 and Wenjian Liu was appointed Chief Executive Officer, Chief Financial Officer and Secretary of the Company.
The Company has not generated any revenues from operations and can give no assurance of any future revenues. The Company will require substantial additional funding to initiate and develop its operations. There is no assurance that the Company will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Presentation
The accompanying financial statements have been prepared on the accrual basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2017, which was filed on April 17, 2018.
Cash and Cash Equivalents
The Company considers all liquid investments with an original maturity of three months or less that are readily convertible into cash to be cash equivalents.
Convertible Debt
Convertible debt is accounted for under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470,
Debt – Debt with Conversion and Other Options
. The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued. The BCF for the convertible instruments, if any, is recognized and measured as a reduction to the carrying amount of the convertible instrument equal to the relative fair value of the conversion features, which is credited to additional paid-in-capital.
Income Taxes
The Company has not generated any taxable income, and, therefore, no provision for income taxes has been provided.
The Company accounts for income taxes in accordance with FASB ASC 740,
Income Taxes
, which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. At March 31, 2018 and December 31, 2017, the Company has established a full valuation allowance against its deferred tax assets, principally for operating losses, due to the uncertainty in realizing the benefits.
The Company follows the provisions of FASB ASC 740-10-25. The provisions prescribe a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns and require that uncertain tax positions are evaluated in a two-step process. The Company does not have any uncertain tax positions.
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WESTERN LUCRATIVE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
FASB ASC 820,
Fair Value Measurement
, specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:
Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.
Level 2 Inputs – Inputs other than the quoted prices in Level 1 that are observable either directly or indirectly.
Level 3 Inputs – Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.
FASB ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Non-derivative financial instruments include payables. As of March 31, 2018 and December 31, 2017, the carrying values of these financial instruments approximated their fair values due to their short term nature. The convertible promissory note payable is recorded at cost. The carrying amount approximated fair value.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Earnings (Loss) per Share
The Company computes net earnings (loss) per common share in accordance with FASB ASC 260,
Earnings Per Share
and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions of ASC 260 and SAB 98, basic net earnings (loss) per common share is computed by dividing the amount of net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants, convertible preferred stock and convertible notes. The Company’s common stock equivalents were excluded in the computation of diluted net (loss) per share since their inclusion would be anti-dilutive.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications have no effect on the accompanying statements of operations and cash flows.
10
WESTERN LUCRATIVE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
3. RECENTLY ISSUED ACCOUNTING STANDARDS
As of the date that this quarterly report is filed, there are no other recently issued accounting pronouncements which adoption would have a material impact on the Company’s financial statements.
4. COMMON STOCK
The Company has authorized seven hundred and fifty million shares of common stock with a par value of $.001. As of March 31, 2018 and December 31, 2017, there are 18,735,000 shares and 8,505,000 shares of common stock issued and outstanding, respectively. The Company entered into a debt assumption and conversion agreement, dated January 31, 2018, pursuant to which $30,815 in accounts payable and accrued expenses and $3,723 accrued interest owed to Magellan Capital Partners, Inc. (“Magellan”) were converted into 10,230,000 shares of the Company’s common stock, issued in the name of Tonbridge, LLC, a company under common control with Magellan.
5. CONVERTIBLE PROMISSORY NOTES CANCELLATION
As of December 31, 2017, the Company had $17,500 convertible notes outstanding with a $17,500 beneficial conversion feature discount feature. On January 31, 2018, the Company entered into a cancellation of debt agreement with Millennium Group, Inc., for the cancellation of $11,864 in aggregate principal and accrued interest under a promissory note, dated August 20, 2010. The Company also entered into a cancellation of debt agreement with Savile Town Investments, Inc., dated as of January 31, 2018, for the cancellation of $1,881 in aggregate principal and accrued interest under a promissory note, dated December 31, 2012, which was assigned to Codell Financial Services, LLC on April 26, 2017. In addition, the Company entered into a cancellation of debt agreement with Magellan Capital Partners, Inc., for the cancellation of $7,526 in aggregate principal and accrued interest under a promissory note, dated December 31, 2012.
In accordance with ASC 470-20, Debt with conversion and other options, as the conversion price of the share is at $0.01 per diluted common shares, the beneficial conversion feature or BCF of the convertible promissory notes were calculated based on the intrinsic value. The fair value of the shares at the issuance date was $0.52 and the BCF was $0.51 per share. As the total BCF is greater than the total proceeds of the $17,500 convertible notes, in accordance with ASC 470-20 the BCF is limited to the total proceeds of the convertible notes which is $17,500. The Company recorded the total convertible value of the notes issued to the Company in the amount of $17,500 as a debt discount upon issuance.
In accordance with accounting principles generally accepted in the United States of America, the above promissory notes should have been accreted up commencing upon their issuance up to their value required to be paid on the due dates. The Millenium note should have had a value of $10,000 on its August 20, 2017 due date and the two other notes (Magellan and Savile Town) should have had a total value of $7,500 on their December 31, 2017 due date. Do to the inactivity of the Company and the fact that these three notes and their related accrued interest was forgiven, from a qualitative perspective, a determination was made not to amend or correct prior filings for this error.
11
WESTERN LUCRATIVE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
6. INCOME TAXES
At March 31, 2018 and December 31, 2017, the Company has established full a valuation allowance against its deferred tax assets, principally for operating loss carry forwards, due to the uncertainty in realizing the benefits. As of March 31, 2018, the Company had approximately $123,000 of unused operating loss carry forwards expiring through 2038. This carry forward will be significantly limited due to the change in control of the Company on January 31, 2018 as per IRC Section 382.
Currently, the 2015, 2016, and 2017 tax years are open and subject to examination by the taxing authorities. However, the Company is not currently under audit nor has the Company been contacted by any of the taxing authorities.
7. DUE TO RELATED PARTY
As of March 31, 2018 and December 31, 2017, the Company had a non-interest bearing related party payable of $4,800 and $0, respectively, due to the principle shareholder of the Company who advanced funds for the Company’s operations.
8. CONTINGENCIES
The Company could become a party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters.
As of the date of this report, there are no material pending legal proceedings to which the Company is a party or of which any of its property is the subject, nor are there any such proceedings known to be contemplated.
9. GOING CONCERN
The Company’s financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure. The Company has not generated any revenues since inception. While the Company is attempting to commence operations and generate revenues, the Company continues to be reliant upon its stockholders to support its operations. This raises substantial doubt about the Company’s ability to continue as a going concern.
Management is hoping to raise additional funds through the issuance of additional equity or debt securities.
While the Company believes in its ability to raise additional funds and the viability of its strategy, there can be no assurances that they will be successful. The Company’s ability to continue as a going concern is dependent upon the continued financial support from its stockholders and its ability to obtain the necessary equity or debt financing and eventually commence and attain profitable operations.
The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
10. SUBSEQUENT EVENTS
The Company’s management has performed subsequent events procedures through May 21, 2018, which is the date the financial statements were available to be issued, and determined there were no subsequent events that would require recognition or disclosure in the consolidated financial statements.
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