NOTES TO UNAUDITED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(in U.S. Dollars, except for number of shares or otherwise stated)
NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS
Cloudweb, Inc. (the “Company”, or “we”) is a Florida corporation incorporated on May 25, 2014 as Formigli, Inc. In December 2015, the Company changed its name to Data Backup, Inc., and on November 4, 2016, the Company changed its name to Data Backup Solutions Inc. On October 1, 2017, the Company changed its name to Cloudweb, Inc.
We are currently exploring different options of further developing and marketing our web hosting and data storage services. This includes plans to make hosting available for free while being supported by advertiser content. The Company will also look into white labeling its services to allow other brands to use our platforms for their own needs.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2020 have been omitted. This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2020 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on March 10, 2021.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
Basic and Diluted Income (Loss) Per Share
The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
For the three months ended March 31, 2021 and 2020, respectively, the following convertible notes were excluded from the computation of diluted net loss per shares as the result of the computation was anti-dilutive:
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March 31,
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March 31,
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2021
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2020
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(Shares)
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(Shares)
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Convertible notes payable
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57,827,097
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30,645,917
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Recent accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with Conversion and Other Options”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its financial statements.
NOTE 3 – GOING CONCERN
The Company believes that its existing capital resources may not be adequate to enable it to execute its business plan. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company estimates that it will require additional cash resources from loan from related party and unaffiliated parties based on its current operating plan and condition. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans.
NOTE 4 – RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2021, the Director of the Company advance $16,300 for paying operating expenses on behalf of the Company. The loan is non-interest bearing and due on demand.
NOTE 5 – PROMISSORY NOTES
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March 31,
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December 31,
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Expiry Date
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2021
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2020
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Interest Rate
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Promissory Note - November 2017
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Due on demand
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$
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2,160
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$
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2,160
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60% per annum
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Promissory Note - March 2018
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3/31/2028
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15,296
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15,296
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30% per annum
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Promissory Note - June 2018
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6/30/2028
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12,249
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12,249
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30% per annum
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Promissory Note - September 2018
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9/30/2028
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5,408
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5,408
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30% per annum
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Promissory Note - December 2018
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12/31/2028
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6,137
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6,137
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30% per annum
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Promissory Note - March 2019
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3/31/2029
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7,150
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7,150
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30% per annum
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Promissory Note - June 2019
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6/30/2029
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10,105
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10,105
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30% per annum
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Promissory Note - September 2019
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9/30/2029
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4,081
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4,081
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30% per annum
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Promissory Note - December 2019
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12/31/2029
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6,900
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6,900
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30% per annum
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69,486
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69,486
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Less current portion of promissory note payable
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(2,160
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)
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(2,160
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)
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Long-term promissory notes payable
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$
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67,326
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$
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67,326
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As of March 31, 2021 and December 31, 2020, the accrued interest on the promissory notes was $51,254 and $45,881, respectively.
NOTE 6 – CONVERTIBLE NOTES
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March 31,
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December 31,
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Expiry Date
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2021
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2020
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Convertible Notes - July 2017
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6/30/2022
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$
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116,000
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$
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116,000
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Convertible Notes - January 2020
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Due on demand
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8,033
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8,033
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Convertible Notes - March 2020
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Due on demand
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4,768
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4,768
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Convertible Notes - June 2020
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Due on demand
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13,800
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13,800
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Convertible Notes - September 2020
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Due on demand
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7,307
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7,307
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Convertible Notes - December 2020
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Due on demand
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6,074
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6,074
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Less debt discount
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(2,987
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)
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(3,584
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)
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152,995
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152,398
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Less current portion of convertible note payable
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(39,982
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)
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(39,982
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)
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Long-term convertible notes payable
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$
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113,013
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$
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112,416
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Convertible Notes – July 2017
On July 1, 2017, the Company replaced the promissory notes held by the four non-affiliated assignees with convertible notes at principal amount of $34,000, for total note principal amount of $136,000. The convertible notes bear interest at 4% per annum, has an original expiry date of June 30, 2019 and subsequently extended to June 30, 2022 and are convertible at $0.005 per share for the Company common stock. On January 2, 2018, the four non-affiliated holders of the convertible notes elected to convert $5,000 principal portion of their notes for 1,000,000 shares of common stock at $0.005 per share. An aggregate $20,000 principal amount of the four convertible notes were converted for 4,000,000 common shares.
Convertible Note – January 2020
On January 2, 2020, the Company replaced a promissory note of $17,033 originally issued to an unaffiliated party on December 31, 2017 with a convertible note of $17,033. The convertible note is due on demand, bear interest at 10% per annum and is convertible at $0.003 per share. The discount on convertible note from beneficial conversion feature of $17,033 was fully amortized during the year ended December 31, 2020.
Convertible Note – March 2020
On March 4, 2020, the convertible note comprising of principal amount of $17,033 and accrued interest of $21,073 was sold to another unaffiliated party. On March 23, 2020, the principal amount of the convertible note of $9,000 was converted into 3,000,000 shares of common stock. (see Note 7)
On March 31, 2020, the Company issued to an unaffiliated party a convertible note at $4,768 for paying operating expenses on behalf of the Company. The convertible note is due on demand, bears interest at 30% per annum and is convertible at $0.001 per share. The discount on convertible note from beneficial conversion feature of $4,768 was fully amortized during the year ended December 31, 2020.
Convertible Note – June 2020
On June 30, 2020, the Company issued to an unaffiliated party a convertible note at $13,800 for paying operating expenses on behalf of the Company. The convertible note is due on demand, bears interest at 30% per annum and is convertible at $0.001 per share. The discount on convertible note from beneficial conversion feature of $13,800 was fully amortized during the year ended December 31, 2020.
Convertible Note – September 2020
On September 30, 2020, the Company issued to an unaffiliated party a convertible note at $7,307 for paying operating expenses on behalf of the Company. The convertible note is due on demand, bears interest at 30% per annum and is convertible at $0.001 per share. The discount on convertible note from beneficial conversion feature of $7,307 was fully amortized during the year ended December 31, 2020.
Convertible Note – December 2020
On December 31, 2020, the Company issued to an unaffiliated party a convertible note at $6,074 for paying operating expenses on behalf of the Company. The convertible note is due on demand, bears interest at 30% per annum and is convertible at $0.001 per share. The discount on convertible note from beneficial conversion feature of $6,074 was fully amortized during the year ended December 31, 2020.
During the three months ended March 31, 2021 and 2020, the Company recognized amortization of debt discount and beneficial conversion feature of $600 and $22,401, respectively.
As of March 31, 2021 and December 31, 2020, the convertible notes payable was $113,013 and $112,416, net of note discount of $2,987 and $3,584, and accrued interest payable was $65,441 and $61,684, respectively.
NOTE 7 - EQUITY
Authorized Stock
The Company’s authorized common stock consists of 500,000,000 shares with no par value.
Common Shares
On March 5, 2020, the Company issued 60,000,000 shares of restricted common stock valued at $93,000,000 to a corporation controlled by the Company’s CEO. (Note 4)
On March 23, 2020, principal amount of $9,000 from a convertible note was converted for 3,000,000 shares of common stock at stock trading price of $1.25 per share. (Note 6)
NOTE 8 – RISKS AND UNCERTAINTIES
In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at March 31, 2021. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company in the future. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this financial statements. These estimates may change, as new events occur and additional information is obtained.