Dilutive loss per share was not presented, as the Company had no common share equivalents for all periods presented that would affect the computation of diluted loss per share. In addition, the Company has experienced continuing losses, so inclusion of any common share equivalents would result in an anti-dilutive effect.
Cash and Cash Equivalents
The Company considers all highly liquid investment with an original maturity of three months or less to be cash equivalents. At September 30, 2018 and December 31, 2017, the Company did not have any cash and cash equivalents.
Stock-based compensation
The Company recognizes compensation expense for all stock-based compensation awards based on the grant-date fair value estimated in accordance with the provisions of ASC 718.
Income Taxes
Under ASC 740,
“
Income Taxes,
”
deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of September 30, 2018 and December 31, 2017 there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
Fair Value of Financial Instruments
The Company follows guidance for accounting for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
8
KREIDO BIOFUELS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
(Unaudited)
Level 2 inputs are inputs other than quoted prices included within Level 1that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability. The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity of these instruments.
Recent Accounting Pronouncements
The FASB established the Accounting Standards Codification (
“
Codification
”
or
“
ASC
”
) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (
“
GAAP
”
).
Rules and interpretative releases of the Securities and Exchange Commission (
“
SEC
”
) issued under authority of federal securities laws are also sources of GAAP for SEC registrants.
The Company has reviewed recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its financial statements.
NOTE 3 - GOING CONCERN
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans, which raises substantial doubt about the ability of the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4
–
STOCKHOLDERS
’
EQUITY
Common Stock
The Company
’
s Articles of Incorporation authorize the issuance of up to 300,000,000 common shares, par value $0.001 per share, and 10,000,000 preferred shares, also $.001 par value. There were 195,645,159 and 195,645,159 shares of common stock outstanding at September 30, 2018 and December 31, 2017, respectively. There were no preferred shares outstanding during any periods presented.
2017 Equity Issuances
On November 10, 2017 the Company issued to a related party 142,924,167 shares of stock in conversion of $150,074 of debt and $21,435 of accounts payable
–
related party for payment of the Company
’
s expenses.
NOTE 5
–
RELATED PARTY TRANSACTIONS
As of September 30, 2018, the Company has a related party payable in the amount of $8,787. At the year ended December 31, 2017, the Company had a related party receivable in the amount of $3,973. As mentioned in Note 4, the Company issued 142,924,167 shares of common stock valued at $171,509 for conversion of debt and related party payables of $21,435. The related party payable is a shareholder in the Company. The related party
9
KREIDO BIOFUELS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
(Unaudited)
payable of $21,435 was comprised of various accounts payable balances that the related party agreed to pay on behalf of the Company. As of December 31, 2017, the related party had paid down $17,462 of the outstanding balances, leaving a receivable of $3,973.
NOTE 6
–
NOTE PAYABLE
The Company issued a note payable to its transfer agent in November 2017 in the amount of $12,625 in satisfaction of past due amounts due to the transfer agent. The Note requires payments of $526 per month for 24 months and is non-interest bearing. On June 28, 2018, the Note was paid off in full.
NOTE 7
–
SUBSEQUENT EVENTS
The Company evaluated subsequent events through the date these financial statements were issued. There have been no subsequent events after September 30, 2018 for which disclosure is required.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Background and Overview
Kreido Biofuels, Inc. (
“
Kreido Biofuels,
”
“
we
”
or the
“
Company
”
) was incorporated on February 7, 2005 under the name Gemwood Productions, for the purpose of marketing and selling day spa services to tourists at resort destinations throughout Mexico. On November 2, 2006, we changed our name to Kreido Biofuels, Inc. in connection with the acquisition of Kreido Laboratories, Inc., a California corporation, and the disposition of the Gemwood Leasco, Inc. subsidiary, through which entity the tourist business had been carried out. Kreido Laboratories was founded to develop proprietary technology for building micro-composite materials for electronic applications, and developed technology to improve the speed, completeness and efficiency of certain chemical reactions, including esterifications and transesterifications, in the pharmaceutical and special chemical industries. In the first quarter of 2006, Kreido Labs elected to focus exclusively on the biodiesel industry. This business was not successful, and we sold the technology and related assets to an unrelated party on March 5, 2009. After that disposition, we sought unsuccessfully for another acquisition until the present time. In November of 2017, the Company discontinued operations of its subsidiary, Kreido Labs, Inc.
Our initial registration statement on Form SB-2, file number 333-140718, became effective on June 28, 2007. Subsequent to the filing of our Annual Report on Form 10-K for the year ended December 31, 2008, we continued to file annual and quarterly reports with the Securities and Exchange Commission on a voluntary basis through the quarter ended September 30, 2009.
In November 2017, our former majority shareholder and sole officer G. Reed Petersen approached the then sole officer and director offering to pay off the debt of the Company. Mr. Petersen paid the sum of $171,509 in consideration of 142,924,167 shares of stock of the Company. On March 2, 2018, the Company filed a registration statement on Form 10 with the Securities and Exchange Commission. The registration statement on Form 10 became effective May 8, 2018.
On June 5, 2018, the Company and its sole officer and director, G. Reed Petersen, entered into that certain Stock Purchase Agreement (the
“
Stock Purchase Agreement
”
), pursuant to which Mr. Petersen agreed to sell to certain purchasers an aggregate of 142,924,167 shares of common stock of the Company (the
“
Control Shares
”
), representing approximately 73% of the issued and outstanding stock of the Company, for aggregate cash consideration of $420,000 in accordance with the terms and conditions of the Stock Purchase Agreement. The Stock Purchase Agreement was included as Exhibit 10.1 to that Amendment No. 1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2018.
The sale of the Control Shares consummated on June 29, 2018. As a result, the purchasers hold a controlling interest in the Company and may unilaterally determine the election of the Board and other substantive matters requiring approval of the Company
’
s stockholders.
In connection with the sale of the Control Shares, G. Reed Petersen resigned from his positions as the sole executive officer and director of the Company, effective June 29, 2018. Mr. Petersen
’
s departure was not due to any dispute or disagreement with the Company on any matter related to the Company
’
s operations, policies or practices. Concurrently, the Board of Directors appointed Wai Lim Wong to fill the vacancies created by Mr. Petersen
’
s resignation, and to serve as the Company
’
s sole Director, Chief Executive Officer, Chief Financial Officer and Secretary.
Future Operating Plan
We continue to seek acquisition opportunities for the Company. We hope to acquire operating companies based in China, Hong Kong, or other Asian or Southeast Asian countries. We are in initial discussions with several prospective acquisition candidates but have not entered into any binding arrangement with respect to any such candidate. Prospective candidates may be affiliated with current management or significant shareholders.
11
Our acquisition strategy will be to assess a broad range of potential business combination targets and complete an business combination. In doing so, we will evaluate the historical financial statements of the target, its management, and projected future results. In evaluating a prospective target business, we expect to conduct a thorough due diligence review that will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial and other information that will be made available to us.
Our sole officer and director presently has, and in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly, if our officer and director becomes aware of a business combination opportunity which is suitable for an entity to which he has then-current fiduciary or contractual obligations, he will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officer/director will materially affect our ability to complete a business combination.
Our executive officers are not required to commit any specified amount of time to our affairs, and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combination targets and monitoring the related due diligence.
Our executive officer may participate in the formation of, or become an officer or director of, any other blank check company with a class of securities registered under the Exchange Act.
Results of Operations
Following is management
’
s discussion of the relevant items affecting results of operations for the three and nine month periods ended September 30, 2018 and 2017.
Revenues.
The Company generated revenues of $-0- during the three and nine months ended September 30, 2018 as compared to $-0- for the three and nine months ended September 30, 2017.
Operating Expenses.
Operating expenses for the three months ended September 30, 2018 were $8,437, consisting primarily of professional fees, compared to $0 for the same period ended September 30, 2017. The increase is mainly the result of an increase in legal and professional expenses.
For the nine months ended September 30, 2018, we incurred operating expenses of $23,287, as compared to $1,460 for the same period ended September 30, 2017. Operating expenses consisted of professional fees and general and administrative fees. The increase in operating expenses resulted from increased professional and general and administrative fees arising from the sale of the Control Shares. The filing of the Company
’
s Form 10, also added to the increased professional fees. We expect operating expenses to increase as we continue our process of identifying prospective acquisition targets and hopefully successfully consummate such an acquisition.
Other Income (Expense)
. The Company had net other expenses of $ -0- for the three and nine months ended September 30, 2018 compared to $ -0- during the three and nine months ended
September 30, 2017.
Net Loss
. For the three months ended September 30, 2018, the Company had a net loss of $8,437, as compared to $0 for the same period ended September 30, 2017. The Company had a net loss of $23,287 for the nine months ended September 30, 2018 compared to a $1,460 net loss during the nine months ended September 30, 2017. The increase in net loss was due to the increase in professional fees and general and administrative fees incurred by the Company.
12
Liquidity and Capital Resources
As of September 30, 2018, our primary source of liquidity consisted of $-0- in cash and cash equivalents. Since inception, we have financed our operations through a combination of short and long-term loans, and through the private placement of our common stock.
Going Concern Uncertainties.
We have sustained significant net losses which have resulted in a total stockholders
’
deficit at September 30, 2018 of ($8,787) and are currently experiencing a substantial shortfall in operating capital which raises doubt about our ability to continue as a going concern. Until we successfully consummate an acquisition with an operating company, we expect to continue to incur net losses. Depending upon the financial profile of our acquired company, we may continue in our net loss position even after the acquisition of an operating company. With the expected cash requirements for the coming months, without additional cash inflows from an increase in revenues combined with continued cost-cutting or a receipt of cash from capital investment, there is substantial doubt as to the Company
’
s ability to continue operations.
There is presently no agreement in place with any source of financing for the Company and we cannot assure you that the Company will be able to raise any additional funds, or that such funds will be available on acceptable terms. Funds raised through future equity financing will likely be substantially dilutive to current shareholders. Lack of additional funds will materially affect the Company and its business and may cause us to cease operations. Consequently, shareholders could incur a loss of their entire investment in the Company.
Net Cash Used in Operating Activities.
For the nine months ended September 30, 2018, net cash used in operating activities was $9,427, which consisted primarily of a net loss of $23,287, offset by an increase in related party payables of $8,787, a decrease in due from relate party of $3,973 and an increase in prepaid expenses of $2,000.
For the nine months ended September 30, 2017, net cash used in operating activities was $0, which consisted primarily of a net loss of $1,460, offset by an increase in accounts payables of $1,460.
Net Cash Used In/Provided By Investing Activities.
There was no net cash used in or provided by investing activities during the nine months ended September 30, 2018, and 2017.
Net Cash Provided By Financing Activities.
For the nine months ended September 30, 2018, net cash provided by financing activities was $9,427, consisting primarily of proceeds of $21,350 from G. Reed Petersen, our former sole executive officer and director, offset by repayments of $11,923 on an outstanding note payable.
For the nine months ended September 30, 2017, net cash provided by financing activities was $0.
Off-Balance Sheet Arrangements
We do not have any 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 is material to investors.
13
Contractual Obligations
As a
“
smaller reporting company
”
as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Critical accounting policies
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in
N
ote 2 to our financial statements contained herein.
Recent accounting pronouncements
The recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our unaudited condensed consolidated financial statements upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Management
’
s Evaluation on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934
, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, to allow for timely decisions regarding required disclosure.
As of September 30, 2018, we carried out an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, we concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report. Our board of directors has only one member. We do not have a formal audit committee.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2018, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with purchasers and suppliers. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIESAND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
The following documents are filed as exhibits to this Form 10-Q:
INDEX TO EXHIBITS