ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Plan of Operation
The Company’s business is to develop and market
skincare products. Its plan is to build a state-of-the-art online store with a
direct marketing and sales funnel aimed at targeted channels, using internet,
social media, and content marketing. The Company’s marketing approach uses
vetted channels that encompass several steps to gauge performance data from
marketing tests against other campaigns in real-time with the ability to modify
content delivery to targeted consumers immediately. The Company will engage a
team with proprietary algorithmic software to assist in making these marketing
decisions. Management believes this will provide the Company a distinct
advantage over other companies that outsource marketing and advertising efforts
to third parties.
The skincare space is well-suited for direct-to-consumer sales, and there are several channels that Peptide Technologies will leverage to introduce its unique branding and creative advertising assets. Creating brand visibility, along with the back-end support to process orders, is one of Peptide Technologies’ key strengths over smaller competitors in the space. In addition, the Company will create a brand that allows visibility and awareness to be molded organically, thereby increasing the brand’s value quickly.
In addition to basic social media strategies,
management intends to engage top influencers in the skincare space. The Company
will identify new and potential influencers using proprietary algorithmic
software tools. Once sales have begun, management will create a predictable
sales model to accelerate and project the Company’s future growth. The Company
will utilize Facebook, Instagram, Twitter, and an online blog, and will
retarget ads to IP addresses collected from online orders and influencers’
websites.
Given the complexity of global shipping, the Company
plans to partner with a name brand distributor to deliver its products. The
distributor has an advanced fulfillment network, and the Company will benefit
from the distributor’s expertise in worldwide product delivery. Management
plans to negotiate an arrangement with the distributor to warehouse the
Company’s products in the distributor’s fulfillment centers. The distributor
will pick, pack, and ship products, as well as provide customer service for the
Company’s products. The distributor’s fulfillment centers are built to
efficiently manage inventory and are able to handle cross-border shipping and
customs issues.
We are now in the process of putting together a marketing and
sales funnel with the right channels and key trackable metrics to test and
adjust the funnel for maximum effectiveness. Our long-term marketing objectives
include creating brand visibility and awareness, securing paid social media and
online advertising, blogging and content marketing, and developing a public
relations strategy. Marketing media to be
engaged will include social media networks, such as Facebook,
Instagram, Twitter, and YouTube Pre-Roll Ads. Additional
advertising channels will be engaged, including Google PPC (Search Ads),
retargeting ads, influencer marketing, and content marketing. In addition, we
will be creating video content to be used on our website. We expect to launch our marketing campaign next fiscal year.
The Company will rely on related party advances to fund these expenditures
until it can raise money through debt and/or equity financing.
In February 2018, the Company changed its name from Eternelle
Skincare Products Inc. to Peptide Technologies, Inc. to better convey the
broader future potential of the Company as peptides may be used in other
applications aside from skincare products. However, as the Company’s current
focus is developing and marketing skincare products, and as it has no current
plans to expand outside this focus, the Company decided to file a DBA to
continue doing business using the name, Eternelle Skincare Products.
9
Results of Operations for the Years Ended March 31, 2018
and 2017
At present, the Company has no revenue.
Net loss increased from $2,573 for the year ended March 31, 2017 to $49,671 for
the year ended March 31, 2018 due to higher general and administrative expenses
related to being a public company.
Liquidity and Capital Resources
The Company requires significant cash to
launch its business and reduce its payables. The Company’s primary sources of
liquidity and capital resources have been related-party advances, which are not
sufficient prospectively. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. We are actively seeking to
raise additional debt and/or equity capital to add new products and/or services
to commence material operations. If the Company is unable to raise additional
capital in the near future or meet financing requirements, the Company may need
to curtail or alter its plan of operation. Our independent registered public
accounting firm included an explanatory paragraph in their report regarding
substantial doubt about the Company’s ability to continue as a going concern.
Cash Flow
The following table summarizes, for the periods
indicated, selected items in our condensed Statements of Cash Flows:
|
|
Year Ended
|
|
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Net cash (used in) provided
by:
|
|
|
|
|
|
|
Operating activities
|
$
|
(36,122
|
)
|
$
|
(2,573
|
)
|
Investing activities
|
$
|
(16,000
|
)
|
$
|
-
|
|
Financing activities
|
$
|
53,850
|
|
$
|
2,573
|
|
Operating Activities
Cash used in operating activities was $36,122 and $2,573
for the years ended March 31, 2018 and 2017, respectively. The increase in cash
used in operating activities was primarily due to a higher net loss.
Investing Activities
Cash used in investing activities was $16,000 and $0 for
the years ended March 31, 2018 and 2017, respectively. The increase in cash
used in investing activities was primarily due to website development costs.
Financing Activities
Cash provided by financing activities was $53,850 and
$2,573 for the years ended March 31, 2018 and 2017, respectively. The increase
in cash provided by financing activities was primarily due to higher related-party
advances.
Off-Balance Sheet Arrangements
None.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLMENTARY DATA.
PEPTIDE TECHNOLOGIES, INC.
(formerly Eternelle Skincare
Products, Inc.)
TABLE
OF CONTENTS
11
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the shareholders and the board of directors of Peptide Technologies, Inc., formerly
Eternelle Skincare Products, Inc.
Opinion on the Financial
Statements
We have audited the accompanying balance sheets of Peptide Technologies, Inc., formerly Eternelle Skincare Products, Inc. (the "Company") as of March 31, 2018 and 2017, the related statement of operations, cash flows, and stockholders' deficit for the years then ended, 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 March 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
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 audit. 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or
fraud.
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 audit 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 discussed in Note 2 to the financial statements, the Company has incurred continuing net losses, has no operating revenues, and requires additional capital to commence operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ dbbmckennon
We have served as the Company's auditor since 2017.
Newport Beach, California
June 21, 2018
12
PEPTIDE TECHNOLOGIES, INC.
(formerly Eternelle Skincare Products Inc.)
BALANCE SHEETS
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and equivalents
|
$
|
1,728
|
|
$
|
—
|
|
Total Current Assets
|
|
1,728
|
|
|
—
|
|
|
|
|
|
|
|
|
Website, net of accumulated amortization of $2,659 as of March 31, 2018
|
|
13,341
|
|
|
—
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
15,069
|
|
$
|
—
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable
|
$
|
37,870
|
|
$
|
37,230
|
|
Related party advances
|
|
67,113
|
|
|
13,263
|
|
Accrued compensation
|
|
221,192
|
|
|
221,192
|
|
Other accrued liabilities
|
|
10,000
|
|
|
10,000
|
|
Total Current Liabilities
|
|
336,175
|
|
|
281,685
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
(Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
Common stock: $0.001 par value; 675,000,000 shares authorized; 127,112,660 and 156,062,660 issued and outstanding as of March 31, 2018 and March 31, 2017, respectively
|
|
127,113
|
|
|
156,063
|
|
Additional paid-in capital
|
|
731,963
|
|
|
692,763
|
|
Accumulated deficit
|
|
(1,180,182
|
)
|
|
(1,130,511
|
)
|
Total Stockholders’ Deficit
|
|
(321,106
|
)
|
|
(281,685
|
)
|
Total Liabilities and Stockholders’ Deficit
|
$
|
15,069
|
|
$
|
—
|
|
The accompanying notes are an integral part of these financial
statements.
13
PEPTIDE
TECHNOLOGIES, INC.
(formerly Eternelle Skincare Products Inc.)
STATEMENTS OF OPERATIONS
|
|
For the Years Ended
|
|
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Operating Expenses
|
|
|
|
|
|
|
General and administrative, including stock-based compensation of $10,250 and $0 for the years ended March 31, 2018 and 2017, respectively
|
$
|
49,451
|
|
$
|
2,573
|
|
Total Operating Expenses
|
|
49,451
|
|
|
2,573
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
(49,451
|
)
|
|
(2,573
|
)
|
|
|
|
|
|
|
|
Other Expenses
|
|
|
|
|
|
|
Foreign currency loss
|
|
(220
|
)
|
|
—
|
|
Net Loss
|
$
|
(49,671
|
)
|
$
|
(2,573
|
)
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Common Share
|
$
|
0.00
|
|
$
|
0.00
|
|
Weighted Average Number of Common Shares Outstanding
|
|
137,652,220
|
|
|
156,062,660
|
|
The accompanying notes are an integral part of these financial
statements.
14
PEPTIDE
TECHNOLOGIES, INC.
(formerly Eternelle Skincare Products Inc.)
STATEMENTS OF CASH FLOWS
|
|
For the Years Ended
|
|
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Cash Flows From
Operating Activities:
|
|
|
|
|
|
|
Net loss
|
$
|
(49,671
|
)
|
$
|
(2,573
|
)
|
Adjustments to reconcile
net loss to cash flows used in operating activities:
|
|
|
|
|
|
|
Depreciation
|
|
2,659
|
|
|
—
|
|
Stock-based compensation
|
|
10,250
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
640
|
|
|
—
|
|
Net cash used for operating
activities
|
|
(36,122
|
)
|
|
(2,573
|
)
|
|
|
|
|
|
|
|
Cash Flow From Investing
Activities
|
|
|
|
|
|
|
Website development
|
|
(16,000
|
)
|
|
—
|
|
Net cash used in investing
activities
|
|
(16,000
|
)
|
|
—
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
|
|
|
Related party advances
|
|
53,850
|
|
|
2,573
|
|
Net cash provided by financing
activities
|
|
53,850
|
|
|
2,573
|
|
|
|
|
|
|
|
|
Change in cash and
equivalents
|
|
1,728
|
|
|
—
|
|
Cash and cash equivalents,
beginning of year
|
|
—
|
|
|
—
|
|
Cash and cash equivalents,
end of year
|
$
|
1,728
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow
Information:
|
|
|
|
|
|
|
Income taxes
|
$
|
—
|
|
$
|
—
|
|
Interest
|
$
|
—
|
|
$
|
—
|
|
The accompanying notes are an integral part of these financial
statements.
15
PEPTIDE
TECHNOLOGIES, INC.
(formerly Eternelle Skincare Products Inc.)
STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid-in Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
Stockholders’
Deficit
|
|
Balance at
March 31, 2016
|
|
|
156,062,660
|
|
|
$
|
156,063
|
|
|
$
|
692,763
|
|
|
$
|
(1,127,938
|
)
|
|
$
|
(279,112
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,573
|
)
|
|
|
(2,573
|
)
|
Balance at
March 31, 2017
|
|
|
156,062,660
|
|
|
|
156,063
|
|
|
|
692,763
|
|
|
|
(1,130,511
|
)
|
|
|
(281,685
|
)
|
Rescission of common stock
|
|
|
(39,200,000
|
)
|
|
|
(39,200
|
)
|
|
|
39,200
|
|
|
|
—
|
|
|
|
—
|
|
Stock-based compensation
|
|
|
10,250,000
|
|
|
|
10,250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,250
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(49,671
|
)
|
|
|
(49,671
|
)
|
Balance at
March 31, 2018
|
|
|
127,112,660
|
|
|
$
|
127,113
|
|
|
$
|
731,963
|
|
|
$
|
(1,180,182
|
)
|
|
$
|
(321,106
|
)
|
The accompanying notes are an integral part of these financial
statements.
16
PEPTIDE TECHNOLOGIES, INC.
(formerly Eternelle Skincare Products Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – NATURE OF
OPERATIONS
Peptide Technologies, Inc., formerly Eternelle Skincare Products Inc. (the “Company” or “Peptide Technologies”), was incorporated in the State of Nevada, United States of America, on November 18, 2005.
The Company’s
business is to develop and market skincare products. Its plan is to build a
state-of-the-art online store with a direct marketing and sales funnel aimed at
targeted channels, using internet, social media, and content marketing. The
Company’s marketing approach uses vetted channels that encompass several steps
to gauge performance data from marketing tests against other campaigns in
real-time with the ability to modify content delivery to targeted consumers
immediately. The Company will engage a team with proprietary algorithmic
software to assist in making these marketing decisions. Management believes this
will provide the Company a distinct advantage over other companies that
outsource marketing and advertising efforts to third parties.
The skincare space
is well-suited for direct-to-consumer sales, and there are several channels
that the Company will leverage to introduce its unique branding and creative
advertising assets. Creating brand visibility, along with the back-end support
to process orders, is one of the Company’s key strengths over smaller
competitors in the space. In addition, the Company will create a brand that
allows visibility and awareness to be molded organically, thereby increasing
the brand’s value quickly.
The Company has
identified a cosmetic and skincare manufacturer and has agreed upon product
formulations, the design and sourcing of packaging, and product costs. The
Company does not intend to enter into a long-term master supply agreement with
the manufacturer. Rather, orders will be placed through individual purchase
orders as needed. The Company’s activities are subject to significant risks and
uncertainties, including the need for additional capital to carry out its plan
of operation and competition from existing consumer product companies.
The majority of
manufacturing, distribution, marketing, and sales operations will be outsourced.
However, strategic planning and development will be performed internally by the
Company. This includes, but is not limited to, developing our catalog of
products, developing proprietary skincare formulations, pricing our products,
deciding which markets to target, deciding which influencers to engage in
marketing campaigns, developing sales channels such as our e-commerce sites,
determining which marketing initiatives to pursue, and selecting strategic
partners and suppliers to advance our business plan.
NOTE 2 – GOING CONCERN
These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate the continuation of the Company as a going concern. The Company has no revenues, has incurred losses from operations, has excess liabilities over assets of $321,106 and had an accumulated deficit of $1,180,182 as of March 31, 2018. The Company requires significant capital to commence operations. These factors raise doubt about the Company’s ability to continue as a going concern.
Management’s plans are to actively seek capital to
enable the Company to add new products and/or services to ultimately achieve
profitability. However, management cannot provide assurance that they can raise
sufficient capital and whether the Company will ultimately achieve
profitability, become cash flow positive, or raise additional debt and/or
equity capital. If the Company is unable to raise additional capital in the near
future or meet financing requirements, management expects that the Company will
need to curtail operations, seek additional capital on less favorable terms,
and/or pursue other remedial measures.
17
These financial statements do not include any
adjustments related to the recoverability and classification of assets or the
amounts and classification of liabilities that might be necessary should the
Company become unable to continue as a going concern.
NOTE 3 – SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation and Use of Estimates
These financial statements have been prepared in accordance
with U.S. GAAP, which requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could ultimately differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid
investments with original maturities of three months or less.
Revenue Recognition
Revenue is recognized upon shipment or
upon receipt of products by the customer, depending on the agreed-upon terms,
provided that: there are no uncertainties regarding customer acceptance;
persuasive evidence of an agreement exists documenting the specific terms of
the transaction; the sales price is fixed or determinable; and collectability
is reasonably assured. Management assesses the business environment, the
customer’s financial condition, historical collection experience, accounts
receivable aging, and customer disputes to determine whether collectability is
reasonably assured. If collectability is not considered reasonably assured at
the time of sale, the Company does not recognize revenue until collection
occurs.
Website
Expenditures related to the planning and
operation of the Company’s website are expensed as incurred. Expenditures
related to the website application and infrastructure development are
capitalized and amortized over the website’s estimated useful life of three (3)
years. Amortization expense for the years ended March 31, 2018 and 2017 was $2,659
and $0, respectively.
Impairment of Long-Lived Assets
The long-lived assets held and used by the Company are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the carrying amount of any long-lived asset may be impaired, an evaluation of recoverability is performed. There were no impairment losses during the years ended March 31, 2018 and 2017.
Share-Based Payments
The Company recognizes the cost of employee
share-based payment awards on a straight-line attribution basis over the
requisite employee service period, net of estimated forfeitures.
Determining the fair value of share-based awards at the measurement date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise and the associated volatility. Peptide Technologies estimates the fair value of options granted using the Black-Scholes valuation model. The expected life of the options used in this calculation is the period of time the options are expected to be outstanding. Expected stock price volatility is based on the historical volatility of Peptide’sPeptide Technologies’ stock for a period approximating the expected life, and the risk-free interest rate is based on the implied yield available on US Treasury zero-coupon issues approximating the expected life. Judgment is also required in estimating the amount of share-based awards that will be forfeited prior to vesting.
The fair value of restricted stock awards is based on the par value of Peptide Technologies’ common stock on the date of grant.
Income Taxes
Certain income and expense items are accounted for
differently for financial reporting and income tax purposes. Deferred income
tax assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities, applying enacted
statutory income tax rates in effect for the year in which the differences are
expected to reverse. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount expected to be realized.
18
Basic and Diluted Income (Loss) Per Share
Basic income (loss) per common share is computed by
dividing net income (loss) available to common stockholders by the weighted
average number of common shares outstanding. Diluted income (loss) per common
share is computed similar to basic income (loss) per common share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. Diluted earnings per share is
not shown for periods in which the Company incurs a loss because it would be
anti-dilutive.
Fair Value of Financial Instruments
Fair value is
defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants as of the measurement date. Applicable accounting guidance
provides an established hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable inputs
by requiring that the most observable inputs be used when available. Observable
inputs are inputs that market participants would use in valuing the asset or
liability and are developed based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that reflect the
Company’s assumptions about the factors that market participants would use in
valuing the asset or liability. There are three levels of inputs that may be
used to measure fair value:
-
Level 1 - Observable inputs that
reflect quoted prices (unadjusted) for identical assets or liabilities in
active markets.
-
Level 2 - Includes other inputs
that are directly or indirectly observable in the marketplace.
-
Level 3 - Unobservable inputs
which are supported by little or no market activity.
The Company’s financial instruments include accounts payable and accrued compensation. The carrying value of these instruments approximate their fair value because of their short-term nature .
Foreign Currency Translation and Transactions
The financial statements are presented in U.S.
dollars. Foreign-denominated monetary assets and liabilities are translated to
their U.S. dollar equivalents using foreign exchange rates at the balance sheet
date. Revenue and expenses are translated at average rates of exchange during
the period. Related translation adjustments are reported as a separate
component of stockholders’ equity, whereas gains or losses resulting from
foreign currency transactions are included in the results of operations.
Recent
Accounting Pronouncements
The Financial Accounting Standards Board issues
Accounting Standards Updates (“ASU”) to amend the authoritative literature in
the Accounting Standards Codification (“ASC”). There have been a number of ASUs
to date that amend the original text of the ASC. The Company believes those
updates issued-to-date either (i) provide supplemental guidance, (ii) are
technical corrections, (iii) are not applicable to the Company, or (iv) are not
expected to have a significant impact on the Company.
19
NOTE
4 – ACCRUED COMPENSATION
Accrued compensation consists of the following:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Salaries and benefits payable
|
$
|
212,000
|
|
$
|
212,000
|
|
Payroll taxes payable
|
|
9,192
|
|
|
9,192
|
|
Total accrued compensation
|
$
|
221,192
|
|
$
|
221,192
|
|
NOTE 5 – RELATED PARTY
TRANSACTIONS
The Company’s Chief Financial Officer (“CFO”) advanced
$53,850 and $2,573 to the Company during the years ended March 31, 2018 and
2017, respectively, to pay for operating expenses. The advances are due on
demand and carry no interest. The related-party advances totaled $67,113 and $13,263
as of March 31, 2018 and 2017, respectively.
NOTE 6 – COMMON STOCK
The Company has authorized the issuance of 675,000,000 shares of common stock with a par value of $0.001 per share. 127,112,660 and 156,062,660 shares of common stock were issued and outstanding as of March 31, 2018 and 2017, respectively. The Company determined that the fair value of its common stock was equal to its par value during the years ended March 31, 2018 and 2017.
During the year ended March 31, 2018, the Company’s
Board of Directors approved the rescission of 39,200,000 shares of common
stock. Prior to the Company’s change in business focus, these shares were
issued, but not tendered, pending financial compensation to be received by the
Company, agreements to be signed between the Company and certain
consultants/shareholders, or specific performance by the
consultants/shareholders. As these conditions were ultimately not met by these
shareholders, the Board of Directors rescinded these shares. No value was
ascribed to the shares cancelled, thus no gain was recorded. The Company’s
Board of Directors and shareholders have agreed to indemnify the Company for
any shareholder actions related to these share rescissions.
In March 2018, the Company issued 5,000,000 shares of
common stock with a fair value of $5,000 to Byron Striloff in connection with
his appointment as President of the Company. The Company also issued 5,000,000
shares of common stock with a fair value of $5,000 to Bruce Sellars in
connection with his appointment as a Director and Chief Executive Officer of
the Company. Additionally, the Company issued 250,000 shares of common stock
with a fair value of $250 to Irene Getty in connection with her appointment to
the Board of Directors.
NOTE 7 – INCOME TAXES
The 2017 Tax Act , which was signed into law on December 22, 2017, has resulted in significant changes to the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The 2017 Tax Act also transitions international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low taxed income (GILTI). These changes are effective beginning in 2018.
Income
tax expense differs from the amount that would result from applying the federal
income tax rate to earnings before income taxes. Reconciliations of the U.S.
federal statutory rate to the actual tax rate are as follows for the years
ended March 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Federal tax benefit at
statutory rate
|
|
35.0
|
%
|
|
35.0
|
%
|
Permanent differences:
|
|
|
|
|
|
|
Stock compensation
|
|
-7.2
|
%
|
|
0.0
|
%
|
Temporary differences:
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
-0.5
|
%
|
|
0.0
|
%
|
Other
|
|
-1.2
|
%
|
|
0.0
|
%
|
Change in valuation allowance
|
|
294.3
|
%
|
|
-35.0
|
%
|
Change in effective tax rate
|
|
-320.4
|
%
|
|
0
|
%
|
Total provision
|
|
0.0
|
%
|
|
0.0
|
%
|
20
The
composition of the Company’s deferred tax assets as of March 31, 2018 and 2017
is as follows:
|
|
Asset (Liability)
|
|
|
|
2018
|
|
|
2017
|
|
Current:
|
|
|
|
|
|
|
Other
|
$
|
7,800
|
|
$
|
13,000
|
|
|
|
|
|
|
|
|
Noncurrent:
|
|
|
|
|
|
|
Net operating loss
carryforwards
|
|
231,000
|
|
|
372,000
|
|
Valuation allowance
|
|
(238,800
|
)
|
|
(385,000
|
)
|
Net deferred tax asset
|
$
|
—
|
|
$
|
—
|
|
Due to the reduction in the federal statutory rate
resulting from the Tax Act, current deferred tax assets decreased by $5,200,
noncurrent deferred tax assets decreased by $154,000, and the valuation
allowance decreased by $159,200.
The Company had a net operating loss carryforward
balance of $1,100,663 and $1,061,882 as of March 31, 2018 and 2017,
respectively. The Company’s net operating losses have expiration dates ranging
from 2025 to 2037.
The Company’s recognized and unrecognized deferred tax
assets related to unused tax losses. A full valuation allowance has been
recorded against the potential deferred tax assets associated with all the loss
carryforwards as their utilization is not considered “more likely than not” at
this time.
NOTE 8 – COMMITMENTS
AND CONTINGENCIES
The Company is not currently involved with and does
not have knowledge of any pending or threatened litigation against the Company
or any of its officers.
21