REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS FIRM
To the Board of Directors and
Stockholders of Precious
Investments Inc. and Subsidiary
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Precious Investments, Inc. (the Company) as of July 31, 2018 and 2017, and the
related statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the (two year)
period ended July 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of July 31,2018 and 2017,
and the results of its operations and its cash flows for each of the years in the (two year) period ended July 31, 2018, in conformity
with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but
not for expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we
express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the
financial statements, the Company incurred a net loss of ($1,811,501) during the year ended July 31, 2018, and as of that date,
had a and deficit net worth of ($872,859). The Company is in arrears on accounts with certain vendor creditors which, among other
things, cause the balances to become due on demand. The Company is not aware of any alternate sources of capital to meet such
demands, if made.
As discussed in Note 2
to the financial statements, the Company's significant operating losses raise substantial doubt about its ability to continue
as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our opinion is not modified with respect to that matter.
BMKR, LLP
We have
served as the Company’s auditor since 2016
Hauppauge, NY 11788
March 20, 2019
Member American Institute of Certified
Public Accounts
Member Public Company Accounting Oversight
Board
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
CONSOLIDATED BALANCE SHEET
Audited
July 31, 2018 and 2017
|
|
2018
|
|
2017
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
14,238
|
|
|
$
|
10,997
|
Accounts and
other receivables
|
|
|
561,546
|
|
|
|
24,407
|
Inventory
|
|
|
0
|
|
|
|
203,000
|
Prepaid
expenses
|
|
|
11,154
|
|
|
|
0
|
Related
party receivables
|
|
|
1,209,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
TOTAL
CURRENT ASSETS
|
|
|
1,795,938
|
|
|
|
238,404
|
|
|
|
|
|
|
|
|
EQUIPMENT
AND IMPROVEMENTS
|
|
|
45,130
|
|
|
|
0
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
Security
deposits
|
|
|
36,711
|
|
|
|
0
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
1,877,779
|
|
|
$
|
238,404
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
830,079
|
|
|
$
|
248,408
|
Note
payable - line of credit
|
|
|
264,935
|
|
|
|
0
|
Promissory
notes
|
|
|
40,350
|
|
|
|
16,450
|
Convertible
notes payable
|
|
|
1,034,000
|
|
|
|
9,448
|
Related
party payables
|
|
|
406,274
|
|
|
|
691,202
|
TOTAL
CURRENT LIABILITIES
|
|
|
2,575,638
|
|
|
|
965,508
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES
|
|
|
|
|
|
|
|
Promissory
notes
|
|
|
175,000
|
|
|
|
0
|
Promissory
notes - related party
|
|
|
0
|
|
|
|
442,498
|
TOTAL
LONG-TERM LIABILITIES
|
|
|
175,000
|
|
|
|
442,498
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
2,750,638
|
|
|
|
1,408,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
(DEFICIT) EQUITY:
|
|
|
|
|
|
|
|
Common stock; $0.001
par value; 250,000,000 shares authorized; 14,355,645 and 12,565,645 outstanding as of July 31, 2018 and July 31,2017, respectively
|
|
|
14,267
|
|
|
|
12,566
|
Preferred Stock;
$0.001 par value; 10,000,000 shares authorized, 1,000,000 shares issued and outstanding as of July 31, 2018
|
|
|
1,000
|
|
|
|
0
|
Additional
paid-in capital
|
|
|
1,270,568
|
|
|
|
78,391,183
|
Treasury
stock
|
|
|
(45,000
|
)
|
|
|
(45,000)
|
Accumulated
deficit
|
|
|
(2,113,694
|
)
|
|
|
(79,507,419)
|
Noncontrolling
interest
|
|
|
0
|
|
|
|
(20,932)
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS' (DEFICIT) EQUITY
|
|
|
(872,859
|
)
|
|
|
(1,169,602)
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES & STOCKHOLDERS' (DEFICIT) EQUITY
|
|
$
|
1,877,779
|
|
|
$
|
238,404
|
The accompanying notes are an integral part of these audited financial statements
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
CONSOLIDATED STATEMENTS OF OPERATIONS
Audited
July 31, 2018 and 2017
|
|
SUCCESSOR
|
|
PREDECESSOR
|
|
|
|
|
|
|
|
|
|
|
December 5 , 2017
|
|
|
|
August 1 , 2017
|
|
|
|
|
|
|
|
through
|
|
|
|
through
|
|
|
|
|
|
|
|
July
31, 2018
|
|
|
|
December
4, 2017
|
|
|
|
July
31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,220,755
|
|
|
$
|
203,000
|
|
|
|
826,366
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
2,040,280
|
|
|
|
203,000
|
|
|
|
792,166
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
180,475
|
|
|
|
—
|
|
|
|
34,200
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
Executive compensation
|
|
|
—
|
|
|
|
25,000
|
|
|
|
100,000
|
General and administrative expenses
|
|
|
588,003
|
|
|
|
27,645
|
|
|
|
57,774
|
Professional fees
|
|
|
278,472
|
|
|
|
38,798
|
|
|
|
291,650
|
Total operating expenses
|
|
|
866,475
|
|
|
|
91,443
|
|
|
|
449,424
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(686,000
|
)
|
|
|
(91,443
|
)
|
|
|
(415,224)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(74,667
|
)
|
|
|
(7,901
|
)
|
|
|
(35,209)
|
Loss on asset purchase
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,500,000)
|
Loss on acquisition of Flawless Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,800,000)
|
Loss on conversion of debt
|
|
|
(862,499
|
)
|
|
|
—
|
|
|
|
|
Loss on issuance of stock
|
|
|
(238,816
|
)
|
|
|
—
|
|
|
|
|
Gain on sale of assets
|
|
|
4,588
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
45,893
|
|
|
|
—
|
|
|
|
(2,457,778)
|
Total other expense
|
|
|
(1,125,501
|
)
|
|
|
(7,901
|
)
|
|
|
(12,792,987)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,811,501
|
)
|
|
|
(99,344
|
)
|
|
|
(13,208,211)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interest
|
|
|
—
|
|
|
|
6,040.00
|
|
|
|
(20,932)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss Attributable to Company
|
|
$
|
(1,811,501
|
)
|
|
$
|
(93,304
|
)
|
|
$
|
(13,187,279)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share: basic and diluted
|
|
$
|
(0.13
|
)
|
|
$
|
—
|
|
|
$
|
(1.05)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares
outstanding
|
|
|
14,355,645
|
|
|
|
—
|
|
|
|
12,565,645
|
The accompanying notes are an integral part of these audited financial statements
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
STATEMENTS OF STOCKHOLDERS' DEFICIT
Audited
July 31, 2018 and 2017
|
|
Common Stock
|
|
Preferred Stock C
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional Paid-in Capital
|
|
Treasury Stock
|
|
Noncontrolling Interest
|
|
Accumulated Deficit
|
|
Total Stockholders' Deficit
|
Balance, July 31, 2016
|
|
|
6,742,597
|
|
|
$
|
6,743
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
67,042,669
|
|
|
$
|
(45,000
|
)
|
|
$
|
—
|
|
|
$
|
(66,320,140
|
)
|
|
$
|
684,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for acquisition
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
8,796,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,800,000
|
Stock issued to settle convertible debt
|
|
|
1,561,250
|
|
|
|
1,561
|
|
|
|
|
|
|
|
|
|
|
|
12,669
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,230
|
Shares issued for diamonds
|
|
|
261,798
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
2,539,845
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,540,107
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,932
|
)
|
|
|
(13,187,279
|
)
|
|
|
(13,208,211)
|
Balance, July 31, 2017
|
|
|
12,565,645
|
|
|
$
|
12,566
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78,391,183
|
|
|
$
|
(45,000
|
)
|
|
$
|
(20,932
|
)
|
|
$
|
(79,507,419
|
)
|
|
$
|
(1,169,602)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition adjustment to equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(78,316,705
|
)
|
|
|
|
|
|
|
20,932
|
|
|
$
|
79,507,419
|
|
|
|
1,211,646
|
Stock issued to settle convertible debt
|
|
|
1,540,000
|
|
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
$
|
946,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
947,880
|
Shares issued for cash
|
|
|
250,000
|
|
|
|
250
|
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
249,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251,000
|
Merger adjustments
|
|
|
|
|
|
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(329,918
|
)
|
|
|
(330,007)
|
Foreign Currency Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,725
|
|
|
|
27,725
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,811,501
|
)
|
|
|
(1,811,501)
|
Balance, July 31, 2018
|
|
|
14,355,645
|
|
|
$
|
14,267
|
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
$
|
1,270,568
|
|
|
$
|
(45,000
|
)
|
|
$
|
—
|
|
|
$
|
(2,113,694
|
)
|
|
$
|
(872,859)
|
The accompanying notes are an integral part of these audited financial statements
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Audited
July 31, 2018
and 2017
|
|
For The Years Ended
|
|
|
July 31, 2018
|
|
July 31, 2017
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,811,501
|
)
|
|
$
|
(13,187,279)
|
Net loss attributable to noncontrolling interest
|
|
|
—
|
|
|
|
(20,932)
|
Net loss attributable to the Company
|
|
|
(1,811,501
|
)
|
|
|
(13,208,211)
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Amortization of debt discount
|
|
|
—
|
|
|
|
978
|
Loss on asset purchase
|
|
|
—
|
|
|
|
1,500,000
|
Shares issued for service
|
|
|
—
|
|
|
|
8,800,000
|
Gain on the sale of assets
|
|
|
(4,588
|
)
|
|
|
—
|
Loss on conversion of debt
|
|
|
862,499
|
|
|
|
—
|
Loss on issuance of stock
|
|
|
238,816
|
|
|
|
—
|
Foreign currency adjustment
|
|
|
(27,725
|
)
|
|
|
|
Depreciation expense
|
|
|
15,802
|
|
|
|
—
|
Asset merger adjustment
|
|
|
330,007
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(537,139
|
)
|
|
|
(24,407)
|
Inventory
|
|
|
203,000
|
|
|
|
3,249,943
|
Prepaid expenses
|
|
|
(11,154
|
)
|
|
|
—
|
Accounts payable and accrued expenses
|
|
|
581,671
|
|
|
|
192,549
|
Net cash (used in) provided by operating activities
|
|
|
(160,312
|
)
|
|
|
510,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
Proceeds from sale of assets
|
|
|
8,462
|
|
|
|
|
Purchase of equipment
|
|
|
(20,492
|
)
|
|
|
|
Increase in security deposits
|
|
|
(36,711
|
)
|
|
|
—
|
Net cash (used in) financing activities
|
|
|
(48,741
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
Proceeds from the sale of common stock
|
|
|
1,701
|
|
|
|
—
|
Proceeds from the sale of preferred stock
|
|
|
1,000
|
|
|
|
|
Proceeds from line of credit
|
|
|
264,935
|
|
|
|
|
Proceeds from promissory notes
|
|
|
198,900
|
|
|
|
|
Proceeds from convertible notes
|
|
|
1,024,552
|
|
|
|
|
Proceeds from additional paid in capital
|
|
|
249,750
|
|
|
|
|
Payments on notes payable related party
|
|
|
(319,544
|
)
|
|
|
(942,352)
|
Advances to related parties
|
|
|
(1,209,000
|
)
|
|
|
442,497
|
Net cash from financing activities
|
|
|
212,294
|
|
|
|
(499,855)
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
3,241
|
|
|
|
10,997
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
10,997
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
14,238
|
|
|
$
|
10,997
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
74,667
|
|
|
$
|
35,209
|
Cash paid for tax
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Non-Cash investing and financing transactions
|
|
|
|
|
|
|
|
Issuance of common stock for inventory
|
|
$
|
—
|
|
|
$
|
2,540,107
|
Issuance of note payable for intangible assets
|
|
$
|
—
|
|
|
$
|
1,500,000
|
Acquisition adjustment to equity
|
|
$
|
1,211,646
|
|
|
|
|
Shares issued to settle convertible debt
|
|
$
|
947,880
|
|
|
$
|
14,230
|
The
accompanying notes are an integral part of these audited financial statements
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
NOTE 1 – ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
GLOBAL3PL, INC. (Formerly Precious Investments,
Inc.) (Formerly FIGO Ventures, Inc.) (‘The Company’) was incorporated under the laws of the State of Nevada on May
26, 2004. The Company was an Exploration Stage Company with the principle business being the acquisition and exploration of resource
properties.
The Company had allowed its charter with the
state of Nevada to be revoked by the Secretary of State for failure to file the required annual lists and pay the required annual
fees. Its last known officers and directors reflected in the records of the Secretary of State were unresponsive or stated they
were no longer involved with the Company. The purported replacement officers and directors were unresponsive.
On September 14, 2012, NPNC Management, LLC
filed a petition in the Eighth Judicial District Court in Clark County, Nevada and was appointed custodian of the Company on October
15, 2012.
In order to obtain basic operating capital
to pay for the reinstatement of the Company’s good standing with the Nevada Secretary of State, to bring the Company’s
account current with creditors essential for the reorganization of the Company, such as the transfer agent, and for basic general
corporate purposes, on October 24, 2012, the interim board authorized the sale of 55,000,000 (2,200,000 split adjusted) shares
of common stock for $6,000 to NPNC Management, LLC, in a private placement transaction exempt from the Securities Act of 1933,
as amended, pursuant to section 4(2) thereof and the rules and regulations promulgated there under.
On October 24, 2012, NPNC Management, LLC appointed
Bryan Clark as director of the Company, to hold office until such time as the shareholders elected a board. The interim board,
consisting of Mr. Clark, further acted to appoint Mr. Clark as president, treasurer, and secretary of the Company, to act on behalf
of the Company, and to hold such offices until removed by any subsequent board elected by the shareholders.
On November 13, 2013, Bryan Clark tendered
his resignation from all positions as an Officer and Director of the Company and the Board appointed Anna Wlodarkiewicz as a Director,
President, Secretary and Treasurer of the Company.
On October 9, 2014, Ania Wlodarkiewicz tendered
her resignation from all positions as an Officer and Director of the Company and the Board appointed Nataliya Hearn as a Director,
President, Secretary and Treasurer of the Company.
On March 28, 2016, Nataliya Hearn resigned
as the Company’s Chief Executive Officer and Director. Mr. Kashif Khan is the Company’s sole officer and director.
The Company has completed an asset purchase
agreement dated August 10, 2015 where the Company acquired from Kashif Khan, its sole officer and director, colored diamonds with
a wholesale value of US$4 Million, which he was in control of, in exchange for issuing three secured demand convertible promissory
notes totaling US$4 Million.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
On March 1, 2017, the Company entered into
a joint venture agreement with Eddeb Management (“Eddeb”). The purpose of the joint venture is to build a fund for
the purpose of trading in precious gems, notably, colored diamonds.
On November 16, 2017, the Company entered into
an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) with American Freight Xchange, Inc., a privately
held New York corporation (“American Freight”), and Shipzooka Acquisition Corp. (“Shipzooka Sub”), a newly
formed wholly-owned Nevada subsidiary of Precious Investments, Inc. In connection with the closing of this merger transaction,
Shipzooka Sub merged with and into American Freight (the “Merger”) on December 5, 2017, with the filing of Articles
of Merger with the Nevada Secretary of State and Certificate of Merger with the New York Division of Corporations.
The transaction resulted in the Company acquiring
Subsidiary by the exchange of all of the outstanding shares of Subsidiary for 1,000,000 newly issued Series C Preferred shares
of stock, $0.001 par value (the “Preferred Stock”) of Parent which have conversion and voting rights of 72.5 votes
for each share, representing approximately 90.2% of the voting rights
For accounting purposes, the transaction was
treated as a reverse merger since the acquired entity now forms the basis for operations and the transaction resulted in a change
in control, with the acquired company electing to become the successor issuer for reporting purposes. The accompanying financial
statements have been prepared to reflect the assets, liabilities and operations of American Freight Xchange, Inc. exclusive of
Precious Investments, Inc since all predecessor operations were discontinued.
As part of the transaction, amounts due to
former officers were forgiven, with the balances recorded as Contributed Capital. For equity purposes, accumulated deficit shown
are those American Freight Xchange, Inc.
The Company prior to the merger was is in the
business of purchasing and selling colored diamonds. The Company is in the business of the fulfillment of e-commerce transportation
and logistics for third parties. The Company is both a less-than-truckload (“LTL”) and a Third-Party-Logisitics (“3PL”)
carrier, providing regional, inter-regional and National LTL and or 3PL services. These include arranging for ground and air expedited
transportation and consumer household pickup and delivery (“P&D), through a single integrated organization. In addition
to the core LTL services, the Company provides a range of value added services which cover different areas, such as truckload brokerage
and warehousing services.
Basis of Presentation and Principles of
Consolidation
The accompanying consolidated financial statements
represent the results of operations, financial position and cash flows of GLOBAL3PL, Inc. prepared on the accrual basis of accounting
and conform to accounting principles generally accepted in the United States of America as reported on our fiscal years ending
on July 31, 2018 and 2017. The consolidated financial statements include the financial statements of the Company and its wholly
owned subsidiaries American Freight Xchange, Inc. and KRG, Inc. and its 75% owned subsidiaries Flawless Fund GP, Inc. All inter-company
balances and transactions have been eliminated.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
Cash and cash equivalents
The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents. The Company minimizes its credit risk associated with
cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally
insured limits. As of July 31, 2018, and 2017, no cash balances exceeded the federally insured limit. As of July 31, 2017 the parent
GLOBAL3PL, Inc. did not have a bank account and as such the cash transactions for the Company were run the accounts of entities
commonly controlled by the Company’s CEO.
Accounts receivable and allowance for doubtful
accounts
Accounts receivable are stated at the amount management expects
to collect. The Company generally does not require collateral to support customer receivables. The Company provides an allowance
for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing
economic conditions. As of July 31, 2018, and 2017 the allowance for doubtful accounts was $0.
Use of Estimates
The preparation of financial statements in
conformity with generally accepted accounting principles 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 the financial statements
and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Derivative Financial Instruments
The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risks.
The Company reviews the terms of convertible
loans, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including
embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument.
Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants to employees
and non-employees in connection with consulting or other services. These options or warrants may, depending on their terms, be
accounted for as derivative instrument liabilities, rather than as equity.
Derivative financial instruments are
initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at fair value and then re-valued at each reporting date, with changes in the fair value reported
as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument
liabilities exceed the total proceeds received an immediate charge to income is recognized in order to initially record the derivative
instrument liabilities at their fair value.
The discount from the face value of
the convertible debt instruments resulting from allocating some or all of the proceeds to the derivative instruments, together
with the stated rate of interest on the instrument, is amortized over the life of the instrument through periodic charges to income,
using the effective interest method.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
Derivative Financial Instruments-continued
The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any
previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument could be required within twelve months of the balance sheet date.
Fair value of financial instruments
The Company’s financial instruments consist
of its liabilities. The carrying amount of payables and the loan payable – related party approximate fair value because of
the short-term nature of these items. The promissory notes, and convertible notes payables are measured at amortized cost using
the effective interest method, which approximates fair value due to the relationship between the interest rate on long-term debt
and the Company’s incremental risk adjusted borrowing rate.
Inventories
Inventory consist of loose colored diamond acquired during
the period (See Note 7) and is stated at the lower of cost or net realizable value. The Company writes-down inventory once it has
been determined that conditions exist that may not allow the inventory to be sold for its intended purpose or the inventory is
determined to be excess or obsolete based on our forecasted future sales. Management has also written off inventory that was held
by entities commonly controlled by the CEO and not subsequently sold as of the date of this filing. The charge related to inventory
write-downs is recorded as a loss on inventory valuation as of July 31, 2017.
Revenue Recognition
The Company recognizes revenue related to product sales when
(i) the seller’s price is substantially fixed, (ii) shipment has occurred causing the buyer to be obligated to pay for product,
(iii) the buyer has economic substance apart from the seller, and (iv) there is no significant obligation for future performance
to directly bring about the resale of the product by the buyer as required by ASC 605 – Revenue Recognition. Cost of sales,
rebates.
Long-lived assets
Long-lived assets, including investments to
be held and used or disposed of other than by sale, are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of
other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported
at the lower of the asset’s carrying amount or fair value less cost to sell. For financial statement purposes, depreciation
is being provided based on the straight line method for leasehold improvements and the declining balance method for other assets.
Estimated useful lives of the assets are as follows - machinery 5-7 years; furniture - 5-10 years; leasehold – amortized
over the life of the building lease. It is the Company's policy to capitalize equipment and improvements with an intial cost of
$500 or more.
Income Taxes
The Company’s calculation
of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing
jurisdictions. The Company recognizes tax liabilities for uncertain tax positions based on management’s estimate of whether
it is more likely than not those additional taxes will be required. The Company had no uncertain tax positions as of July 31, 2018
and 2017.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
Income Taxes-continued
The Company accounts for income taxes pursuant
to FASB ASC 740—Income Taxes, which requires recognition of deferred income tax liabilities and assets for the expected future
tax consequences of events that have been recognized in the financial statements or tax returns. The Company provides for deferred
taxes on temporary differences between the financial statements and tax basis of assets using the enacted tax rates that are expected
to apply to taxable income when the temporary differences are expected to reverse.
FASB ASC 740 establishes a more-likely-than-not
threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process
for measuring those tax positions that meet the recognition threshold of being ultimately sustained upon examination by the taxing
authorities. There are no uncertain tax positions taken by the Company on its tax returns. The Company files tax returns in the
U.S. and states in which it has operations and is subject to taxation. Tax years subsequent to 2015 remain open to examination
by U.S. federal and state tax jurisdictions.
Discontinued Operations
For those businesses where management has committed to a plan
to divest, each business is valued at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying
amount of the business exceeds its estimated fair value, an impairment loss is recognized. Fair value is estimated using accepted
valuation techniques such as a DCF model, valuations performed by third parties, earnings multiples, or indicative bids, when available.
A number of significant estimates and assumptions are involved in the application of these techniques, including the forecasting
of markets and market share, sales volumes and prices, costs and expenses, and multiple other factors. Management considers historical
experience and all available information at the time the estimates are made; however, the fair value that is ultimately realized
upon the divestiture of a business may differ from the estimated fair value reflected in the Consolidated Financial Statements.
Depreciation, depletion, and amortization expense is not recorded on assets of a business to be divested once they are classified
as held for sale. Businesses to be divested are classified in the Consolidated Financial Statements as either discontinued operations
or held for sale.
For businesses classified as discontinued operations, the balance
sheet amounts and results of operations are reclassified from their historical presentation to assets and liabilities of operations
held for sale on the Consolidated Balance Sheet and to discontinued operations on the Consolidated Statement of Operations, respectively,
for all periods presented. The gains or losses associated with these divested businesses are recorded in discontinued operations
on the Consolidated Statement of Operations. The Consolidated Statement of Cash Flows is also reclassified for assets and liabilities
of operations held for sale and discontinued operations for all periods presented
Net Loss per Common Share
Basic earnings per share (“EPS”)
is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during
the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of
shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using
the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options
or warrants), and convertible debt or convertible preferred stock, using the if-converted method.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
Recently Issued Accounting Pronouncements
In March 2016, the FASB issued
ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross
versus Net). ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations and includes indicators
to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU
2016-08 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09.
In April 2016, the FASB
issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments
in ASU 2016-10 clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation
guidance, while retaining the related principles for those areas. ASU 2016-10 is effective January 1, 2018 to be in alignment with
the effective date of ASU 2014-09.
In May 2016, the FASB
issued ASU 2016-12, Revenue from Contracts from Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The
amendments in this update affect the guidance in ASU 2014-09, which is not yet effective. The core principle of the guidance in
Topic 606 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. The amendments
in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but instead affect only the narrow aspects noted
in Topic 606. ASU 2016-12 is effective January 1, 2018 to be in alignment with the effective date of ASU 2014-09. Management evaluated
ASU 2016-08, ASU2016-09, ASU 2016-10, and ASU 2016-12 and determined the adoption will not have a material impact on the Company’s
consolidated financial statements.
In December 2016, the FASB issued ASU 2016-20,
“Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”. The effective date and
transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any
other Topic amended by Update 2014-09). Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic
606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
Recently
Issued Accounting Pronouncements-continued
In January 2016, the
FASB issued ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.
ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments including
requirements to measure most equity investments at fair value with changes in fair value recognized in net income, to perform a
qualitative assessment of equity investments without readily determinable fair values, and to separately present financial assets
and liabilities by measurement category and by type of financial asset on the balance sheet or the accompanying notes to the financial
statements. ASU 2016-01 will be effective for the Company beginning on January 1, 2018 and will be applied by means of a cumulative
effect adjustment to the balance sheet, except for effects related to equity securities without readily determinable values, which
will be applied prospectively. Management has reviewed this pronouncement and have determined that it would not have a material
impact to the financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, which
requires an entity to recognize long-term lease arrangements as assets and liabilities on the balance sheet of the lessee. Under
ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all long-term leases, whether operating or financing,
while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases.
The amendments also require certain new quantitative and qualitative disclosures regarding leasing arrangements. ASU 2016-02 will
be effective for the Company beginning on January 1, 2019. Lessees must apply a modified retrospective transition approach for
leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.
Early adoption is permitted. Management does not believe the adoption of ASU 2016-02 will have a material impact on the Company’s
consolidated financial statements.
In July 2017, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic
260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this
Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round
features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down
round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own
stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding
equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at
fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the
amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down
round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders
in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized
guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options),
including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral
of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments
do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments
in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years
beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an
entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal
year that includes that interim period.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
NOTE 2 – GOING CONCERN
These condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of July 31,
2018, and 2017, the Company has an accumulated deficit of $2,113,694 and $79,507,419, respectively. The Company’s ability
to continue as a going concern is contingent upon the successful completion of additional financing arrangements and our ability
to achieve and maintain profitable operations. While we are expanding our best efforts to achieve the above plans, there is no
assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial
doubt about our ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments
that might arise from this uncertainty.
NOTE 3 – EQUIPMENT AND IMPROVEMENTS
Equipment and improvements are summarized as
follows:
|
|
2018
|
|
2017
|
Furniture and fixtures
|
|
$
|
71,513
|
|
|
$
|
0
|
Machinery and equipment
|
|
|
195,813
|
|
|
|
0
|
Transportation equipment
|
|
|
11,293
|
|
|
|
0
|
Building improvements
|
|
|
4,456
|
|
|
|
0
|
|
|
|
283,075
|
|
|
|
0
|
Less accumulated depreciation
|
|
|
|
|
|
|
|
and amortization
|
|
|
237,945
|
|
|
|
0
|
|
|
$
|
45,130
|
|
|
$
|
0
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
for the years ended July 31,
|
|
$
|
15,802
|
|
|
$
|
0
|
NOTE 4 – PROMISSORY NOTES
Promissory notes payable as of July 31, 2018 and 2017 consisted
of the following:
Description
|
|
July 31, 2018
|
|
|
July 31, 2017
|
Note payable dated January 15, 2014, matured January 15, 2015 bearing interest at 12% per annum.
|
|
$
|
3,000
|
|
|
$
|
3,000
|
Note payable dated February 14, 2014 matured February 14, 2015, bearing interest at 12% per annum.
|
|
|
3,750
|
|
|
|
3,750
|
Note payable dated April 1, 2014 matured April 1, 2015, bearing interest at 12% per annum.
|
|
|
4,700
|
|
|
|
4,700
|
Note payable dated January 30, 2014, matured January 30, 2015, bearing interest at 12% per annum.
|
|
|
5,000
|
|
|
|
5,000
|
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
NOTE 4 – PROMISSORY NOTES - continued
Description
|
|
July 31, 2018
|
|
|
July 31, 2017
|
Note payable dated March 8, 2018, matures March 8, 2019 bearing interest
at 10% per annum.
|
|
$
|
23,900
|
|
|
$
|
0
|
Note payable dated July 20, 2018 matures October 1, 2019, bearing interest at 0% per annum.
|
|
|
175,000
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
Total
|
|
$
|
215,350
|
|
|
$
|
16,450
|
Less current portion of long-term debt
|
|
|
40,350
|
|
|
|
16,450
|
Total long-term debt
|
|
$
|
175,000
|
|
|
$
|
0
|
Some notes have matured as of July 31,
2017 and have not been paid. They are due on demand and recorded as current liabilities. Interest expense the years ended
July 31, 2018 and 201 was $3,174 and $1,979 respectively.
NOTE 5 - CONVERTIBLE DEBT
Convertible debt as of July 31, 2018 and 2017 consisted of the following:
Description
|
|
July 31,
2018
|
|
|
July 31,
2017
|
Convertible note agreements (3) dated November 1, 2013, totaling
$45,000. Maturing on November 30, 2015 bearing interest at 12% per annum. Principal and accrued interest is convertible at
$.00225 per share. The beneficial conversion feature was recorded as a discount to the debt and is being amortized over the
term of the notes.
|
|
$
|
0
|
|
|
$
|
9,448
|
Convertible note agreement dated February 20, 2018 in the amount
of $1,034,000 payable and due on demand bearing interest at 10% per annum. Principal and accrued interest is convertible
at $.028712 per share. .
|
|
$
|
1,034,0000
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
Convertible notes, net of discount
|
|
$
|
1,034,000
|
|
|
$
|
9,448
|
During the years ended July 31, 2018 and 2017,
the Company recognized $0 of debt discount accretion expense on the above notes. Interest expense related to these notes for the
years ended July 31, 2018 and 2017 was $46,216 and $1,926, respectively.
NOTE 6 - LINE OF CREDIT
The Company has line of credit with a maximum
borrowing limit of $400,000, bearing an interest rate of prime plus 3.25% per annum and secured by a General Security Agreement.
As of July 31, 2018, and July 31, 2017, $264,935 and $0 were drawn on the line of credit, respectively. Interest expense for the
years ended July 31, 2018 and 2017 was $11,669 and $0 respectively. Subsequent to the July 31, 2018 the financial institution made
modification to the borrowing agreement regarding collateral. Please see note 13 Subsequent Events for further details
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
NOTE 7 – RELATED PARTY TRANSACTIONS
A shareholder of the Company has paid certain
expenses of the Company. These amounts are reflected as a loan payable to related party. The shareholder advanced $0 and $442,497
during the years ended July 31, 2018 and 2017. In 2018 other advances were made from other related parties in the amounts of $406,274.
As of the July 31, 2018 and 2017, there were $406,274 and $691,202 due to related parties, respectively.
The Company has consulting agreements with
two of its shareholders to provide management and financial services that commenced on December 1, 2017. For the year ended July
31, 2018 consulting fees paid were $178,860.
The Company on February 20, 2018 entered into
a related party (Recommerce Group, Inc) note receivable in the amount of $1,034,000. The Company made an additional advance in
the amount of $175,000 that is non-interest bearing. The note is payable and due on demand and bears interest at the rate of 10%.
Interest income in the amount of $45,893 for the year ended July 31, 2018 has been recorded in the financial statements.
ASSET PURCHASE AGREEMENT
On March 28, 2016, the Company signed a letter
of intent (the “LOI”) with Karrah Inc., an Ontario corporation (“Karrah”), and the sole shareholder of
Karrah, Farrah Khan (“Khan”). Khan is the wife of the Company’s officer and director, Kashif Khan. Pursuant to
the LOI, the parties set forth their understandings in contemplation of an acquisition from Khan of all of the issued and outstanding
shares of stock in Karrah, resulting in a parent subsidiary relationship. In consideration for the acquisition of Karrah, the Company
planned to issue to Khan a three-year promissory note (the “Note”) for $1,500,000, with interest at 6% per annum. Interest
would have been payable at maturity or from time to time at the Company’s sole discretion. The Company had the right to prepay
the Note and it would have been secured by the assets of Karrah.
On October 26, 2016, the Company learned that
it was not possible to obtain an audit of Karrah. As such on October 28, 2016, the Company restructured the entire transaction
by entering into a Termination and Restructure Agreement.
As part of the Termination and Restructure
Agreement, the Company and Khan mutually agreed to cancel the Agreement to acquire the issue and outstanding shares of stock in
Karrah. Second, the Company agreed to purchase from Karrah its customer list in exchange for a revised promissory note. The New
Note will be in favor of Karrah, valued at $1,500,000 with interest at 6% per annum, and will not be secured by the assets of Karrah.
Because the entities were under common control at the time of the acquisition the customer list was transferred to the Company
at the transferor’s historical basis of $0. The excess of the consideration paid, and the carryover basis was recorded as
a loss on asset purchase for the year ended July 31, 2017.
On July 6, 2016, the Company entered into a
one-year Consulting Agreement with Karrah, Inc. and Kashif Khan for the team to act as a non-exclusive advisor and sales agent
in assisting us in the marketing and sales of our colored diamond inventory on an international basis and domestically.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
ASSET PURCHASE AGREEMENT - continued
In exchange for the consulting services, the
Company agreed to allow the consultant to retain up to the first $1,500,000 in revenues generated, which shall be used exclusively
to pay off that certain promissory note we issued to Karrah, Inc. dated October 28, 2016 in the principal amount of $1,500,000.
Following such payment, we have agreed to a revenue share, with our company allotted 95% and the consultant allotted 5% of all
gross revenues received solely from the efforts of the consultant in the sale of our diamond inventory. Sales conducted by us will
not be subject to a revenue share. During the year ended December 31, 2017, the Company paid $916,366 is sales revenue toward the
note. As of the year ended July 31, 2017, the Company recognized of $35,018 of interest expense and had the note had a balance
of $583,634.
NOTE 8 – DIAMOND PURCHASE AGREEMENTS
During the year ended July 31, 2017 , the Company
entered into and closed various Diamond Purchase Agreements to purchase diamond assets consisting of various colored diamonds with
for 261,798 post-split shares of common stock valued at $2,540,107 . During the year ended July 31, 2017, the company experienced
total write-downs of the colored diamond inventory in the amount of $2,457,778. As of July 31, 2017 the Company’s had a balance
of $203,000 in colored diamond inventory, respectively.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Employment agreement
On July 29, 2016, the Company entered into an employment agreement
with Kashif Khan (“Khan”) to be the Chief Executive Officer. Khan’s initial annual Base Salary is $100,000. Khan
will also be eligible to earn a Performance Bonus for each complete fiscal year, which will be equal to fifty percent (50%) of
his Base Salary for such fiscal year. Kahn was also granted 1,625,000 post-split shares of common stock and 2,500,000 post-split
options.
Litigations, Claims and Assessments
The Company may become involved in various
lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties,
and an adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any
such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its
business, financial condition or operating results.
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
NOTE 9 – COMMITMENTS AND CONTINGENCIES
- continued
Office Lease
On January 8, 2018, the Company executed an
amendment to an existing lease agreement to extend the lease term for one year at a rate of $19,132 per month. Rent expense was
$227,493 and $0 for the years ended July 31, 2018 and 2017.
Future minimum lease payments of the lease
are below:
Year
|
|
Amount
|
|
2019
|
|
|
$
|
229,584
|
|
|
2020
|
|
|
$
|
95,660
|
|
On February 23, 2016, the Company entered into
a sixty-six (66) month lease for two copiers for quarterly payment of $1,350.
Future minimum lease payments of the lease
are below:
Year
|
|
Amount
|
|
2019
|
|
|
$
|
5,400
|
|
|
2020
|
|
|
$
|
5,400
|
|
|
2021
|
|
|
$
|
5,400
|
|
NOTE 10 – STOCK OPTIONS
On February 14, 2018, the Company issued options
to purchase 3,000,000 post-split shares of common stock at an exercise price of $0.30 per share to a Brazcan Capital, Ltd. The
warrants were exercised on March 15, 2018 to purchase 250,000 shares of common stock for $75,000.
The following is a summary of stock warrants
activity during the year ended July 31, 2018 and 2017.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, July 31, 2017
|
|
|
0.00
|
|
|
$
|
0.00
|
Warrants granted and assumed
|
|
|
3,000,000
|
|
|
$
|
—
|
Warrants expired
|
|
|
—
|
|
|
|
—
|
Warrants canceled
|
|
|
—
|
|
|
|
—
|
Warrants exercised
|
|
|
3,000,000
|
|
|
$
|
0.30
|
Balance, July 31, 2018
|
|
|
—
|
|
|
|
—
|
PRECIOUS INVESTMENTS, Inc., also known as
GLOBAL3PL, INC. AND SUBSIDIARIES.
Notes to Audited Financial Statements
July 31, 2018 and 2017
NOTE 11
– INCOME TAXES
The Company provides for income taxes under
FASB ASC 740, Accounting for Income Taxes. FASB ASC 740 requires the use of an asset and liability approach in accounting
for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and
tax bases of assets and liabilities and the tax rates in effect currently.
FASB ASC 740 requires the reduction of deferred
tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient
taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred
tax asset has been recorded.
For the year ended July 31, 2018, the cumulative
net operating loss carry-forward from continuing operations is approximately $28,844,023 and will expire beginning in the year
2031.
The cumulative tax effect at the expected rate
of 21% of significant items comprising our net deferred tax amount is as follows as of June 30, 2018 and 2017:
|
|
2018
|
|
2017
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
28,844,023
|
|
|
$
|
27,032,522
|
Valuation allowance
|
|
|
(28,844,023
|
)
|
|
|
(27,032,522)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
Due to the change in ownership provisions of
the Tax Cut Jobs Act of 2018, net operating loss carry forwards of approximately $28,844,023 for Federal income tax reporting purposes
are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use
in future years.
NOTE 12 – STOCKHOLDERS’ EQUITY
During the year ended July 31, 2017, the Company
issued 261,798 shares of common stock (post-split) valued at $2,540,107 related to various Diamond Purchase Agreements.
During the year ended July 31, 2017, the Company
issued 4,000,000 shares of common stock (post-split) valued at $8,800,000 for services.
During the year ended July 31, 2017, the Company
issued 1,561,250 shares of common stock (post-split) valued at $14,230 for the conversion of a convertible note payable dated November
1, 2013.
During the year ended July 31, 2018, the Company
issued 1,540,000 shares of common stock (post-split) valued at $947,880 for the conversion of a convertible note payable dated
November 1, 2013.
During the year ended July 31, 2018, the Company
issued 250,000 shares of common stock (post-split) valued at $250,000 for the issuance of stock.
During the year ended July 31, 2018, the Company
issued 1,000,000 shares of series C preferred stock valued at $1,000 as part of the merger on December 5, 2017.
NOTE 13
– SUBSEQUENT EVENTS
On January 9, 2019 the Company entered into
a convertible secured promissory note agreement with the Sanguine Group, LLC in the amount of $625,000. The note bears interest
at the rate of 12% and is due January 9, 2020. The note agreement requires quarterly interest payments of $18,750 commencing on
April 1, 2019.
The Company as of February 1, 2019 is required
by the financial institution to maintain a cash collateral account in the amount of $200,000.
On September 4, 2018 the
Company incorporated Cannagistics, Inc., in the Province of Ontario, Canada. This is intended to be a new line of business
for the Company but is dormant at this time.