ITEM 1. BUSINESS
Our History
Sichuan Leaders Petrochemical Company (“we,” “us,” “our” or the “Company”), formally known as Quality Wallbeds, Inc., was incorporated under the laws of the State of Florida on June 29, 2000. From our inception through May 2013, we provided quality space saving custom home furniture and closet organizing systems to the general public.
In May 2013, our Board of Directors (the “Board”) determined that to continue to protect and increase shareholder value, it would be to the advantage, welfare and best interests of our shareholders to pursuit other business opportunities within lubricating oil research and development, production and sales in Asia in order to generate new business revenue. The Board agreed to the change in the business strategy and to change the name of the Company to reflect said new direction and mission. To facilitate this action, the Board voted to dispose of all of our assets related to the retail operation of the wall bed products. This action was approved on May 21, 2013 by shareholders representing 87% of our issued and outstanding shares of common stock.
Our Business
Since May 2013, we have been exploring various opportunities within the petrochemical field for the acquisition of companies in Asia that are wholesalers or retailers of petrochemical products for the automotive industry. Management has sought to acquire companies through mergers and acquisitions or in the alternative to acquire the rights to distribute products throughout the People’s Republic of China and Southeast Asia. Management has determined that the opportunities in the petrochemical field in Asia have declined in recent years. Management believes the change in our strategic business direction will be more difficult and will take longer to complete any acquisitions and generate future cash flows. Accordingly, we have expanded our business plan to include mergers and acquisitions of non-petrochemical companies in Asia and the United States.
The realization value from any additional services to be offered is largely dependent on factors beyond our control such as the market for our services. We currently have no operations with which to raise cash. Our only source for cash at this time is investments by our current sole officer and director.
Management believed that the market for oil based products in the automotive industry could be successful throughout the Asian markets, but has struggled in this endeavor. Accordingly, although we have not abandoned the business model for the distribution of petrochemical products in the automotive industry, however we are also pursuing mergers and acquisitions of non-petrochemical companies in Asia and the United States. Any change in our strategic business direction may take years to complete and future cash flows, if any, are impossible to predict at this time.
We make use of our own website www.slpc1.com to disseminate information regarding our services to gain access to potential clients and target companies for mergers and acquisitions.
We originally engaged AF Ocean Investment Management Company (the “Service Provider”), effective June 1, 2014, for access to and use of office space at a location leased by the Service Provider from a third party, for legal services, management and accounting related services including, without limitation, preparing periodic and other reports required to be filed under the Securities Exchange Act of 1934, preparing financial reports, bookkeeping, managing their websites, handling previous employee matters as they should arise, and related governmental filings, handling advertising matters, and processing payables. (collectively, the “Services”).
The agreement with the Service Provider was continued for another one year term. We paid the Service Provider a management fee of $1996 per month, totaling $23,957 for the twelve month ended December 31, 2016.
During the next 12 months, our only foreseeable cash requirements will relate to the payment of our Securities and Exchange Commission (“SEC”) and Exchange Act reporting filing expenses, including associated accounting fees; costs incident to reviewing or investigating any potential business venture; maintaining our good standing as a corporation in our state of organization; and payment of the $1,996 monthly management fee.
Principal Products and Their Markets
We currently have no business operations and produce no products or provide any services.
Products Distribution Methods
We currently have no business operations and produce no products or provide any services.
Status of any Publicly Announced New Product or Service
We currently have no business operations and produce no products or provide any services.
Competitive Business Conditions
Management believes that there are literally thousands of shell companies engaged in endeavors similar to those engaged in by the Company; many of these companies have substantial current assets and cash reserves. Competitors also include thousands of other publicly-held companies whose business operations have proven unsuccessful, and whose only viable business opportunity is that of providing a publicly-held vehicle through which a private entity may have access to the public capital markets via a reverse reorganization or merger. There is no reasonable way to predict our competitive position or that of any other entity in these endeavors; however, we, having limited assets and no cash reserves, will no doubt be at a competitive disadvantage in competing with entities that have significant cash resources and have recent operating histories when compared with the lack of any substantive operations by the Company.
Sources and Availability of Raw Materials and Names of Principal Suppliers
Because we currently have no business operations and produce no products or provide any services, we do not use any raw materials nor have any suppliers at this time.
Dependence on One or a Few Customers
Because we currently have no business operations and produce no products or provide any services, we do not have any customers at this time.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts
At the present time, we own the domain name www.slpc1.com. We have not registered the “Sichuan Leaders Petrochemical Company” mark used by our business as a trade name in Florida or any state or the United States Patent and Trademark Office.
Need for Government Approval of Principal Products or Services
Because we currently have no business operations and produce no products or provide any services, we are not presently subject to any governmental regulation in this regard.
Effect of Existing or Probable Governmental Regulations on the Business
Exchange Act Reporting Requirements
We are subject to the reporting requirements of Section 13 of the Exchange Act, and the disclosure requirements of Regulation S-K. However, as a “smaller reporting company,” we are permitted to omit certain disclosures or provide less disclosure regarding certain information required to be disclosed under Regulation S-K as compared to companies that are not a “smaller reporting company.”
We are required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.
Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to shareholders of the Company at a special or annual meeting thereof or pursuant to a written consent will require the Company to provide the Company’s shareholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the SEC at least ten days prior to the date that definitive copies of this information are forwarded to the Company’s shareholders.
The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to shareholders will cause our expenses to be significantly higher than they would be if we were a privately-held company.
Sarbanes-Oxley Act
We are also subject to the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthen auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; auditor attestation to management’s conclusions about internal controls (this is not applicable to “non-accelerated filers” and “smaller reporting companies”); prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes-Oxley Act will substantially increase our legal and accounting costs.
Foreign Corrupt Practices Act
We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.
State and Local Regulations
There’s no state or local regulations that require us to obtain a special business license for our business, however the State of Florida requires us to file an Annual Report. We are not required as a company to maintain Worker’s Compensation Insurance and pay into the Florida Unemployment Compensation Fund since we have no employees. When we retain new officers and begin to pay salaries we will then have to apply for Workers Compensation Insurance and pay into the Florida Unemployment Compensation Fund.
Research and Development During Our Last Two Fiscal Years
We did not spend any money on research and development during each of the last two fiscal years.
Cost and Effects of Compliance with Environmental Laws
Because we currently have no business operations and produce no products or provide any services, we are not subject to environmental laws in any material manner.
Number of Total Employees and Number of Full Time Employees
We have no employees.
ITEM 1A.
ITEM 1A. RISK FACTORS
We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item pursuant to the requirements under Form 10-K.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2. PROPERTIES
On April 1, 2016, we moved our corporate office from the office space we were occupying with the Service Provider at 11015 Gatewood Drive, Suite 103, Lakewood Ranch, Florida 34211 to 3904 US Hwy 301 N Ellenton, FL 34222. The office space is rented by AF Ocean Investment Management Company the (Service Provider), and the Company pays a monthly management fee to them for services provided which includes the company’s rent. The Service Provider entered into a lease with the landlord. We share the space with the Service Provider, and ChinAmerica Andy Movie Entertainment Media Co. at 3904 US Hwy 301 N Ellenton, FL 34222. The Service Provider’s lease is for a term of one year commencing April 1, 2016, and the monthly rent is $400. We did not enter into a sub-lease with the Service Provider for use of the space. Instead, our use of 3904 US Hwy 301 N Ellenton, FL 34222 is included as part of the services provided by the Service Provider. We consider our current office space arrangement adequate and will reassess our needs based upon our future growth.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions required to be disclosed by Item 103 of Regulation S-K.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted on the OTCQB marketplace under the symbol “SLPC.” Prior to June 5, 2014, our common stock was not traded. Since then, there have been very few trades and there currently is no “established trading market” for our shares of common stock. Management does not expect any established trading market to develop in our shares of common stock unless and until we complete an acquisition or merger and/or we have material operations. In any event, no assurance can be given that any market for our common stock will develop or be maintained.
The limited nature of the trading market can create the potential for significant changes in the trading price for our common stock as a result of relatively minor changes in the supply and demand for shares and perhaps without regard to our business activities. Because of the lack of specific transaction information and our belief that quotations during the below periods were particularly sensitive to actual or anticipated volume of supply and demand, we do not believe that such quotations during this period are reliable indicators of a trading market for our common stock.
The following table sets forth the high and low bid prices of our common stock for the periods noted. These bid prices were obtained from OTC Markets Inc. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The SEC generally defines what is referred to as “penny stock” to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Our common stock is a penny stock and as such is covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our common stock. We believe that the penny stock rules may discourage investor interest in, and limit the marketability of, our common stock.
Holders
As of the close of business on December 31, 2016, there were approximately 36 holders of record of our common stock.
Dividends
We have not declared any cash dividends on our common stock during our two most recent fiscal years. In the near future, we intend to retain any earnings to finance the development and expansion of our business. We do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. The declaration and payment of cash dividends by us are subject to the discretion of the Board. Any future determination to pay cash dividends will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant at the time by the board of Directors. We are not currently subject to any contractual arrangements that restrict our ability to pay cash dividends.
Securities Authorized for Issuance Under Equity Compensation Plans
As of December 31, 2016, there are no compensation plans under which our equity securities are authorized for issuance.
Recent Sales of Unregistered Securities
We did not sell any unregistered common stock or other equity securities during the fiscal year ended December 31, 2016.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not, nor did anyone on our behalf or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) of the Exchange Act, repurchase any outstanding shares of our common stock during any month of our fiscal year ended December 31, 2016.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item pursuant to Item 301 of Regulation S-K.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed elsewhere in this annual report.
Overview
We were incorporated in the State of Florida on June 29, 2000 under the name Quality Wallbeds, Inc. In December 2012, we changed our name in anticipation of new business opportunities in the distribution of petrochemical products in the automotive industry. From our inception through May 2013, we provided custom home furniture and closet organizing systems. We discontinued our wall bed operations in May, 2013. Since then we have focused our efforts on exploring various business opportunities to determine the best strategic business direction. Although we have not abandoned the business model for the distribution of petrochemical products in the automotive industry, we are also pursuing mergers and acquisitions of non-petrochemical companies in Asia and the United States. Since the change in the business model, current management has seen a direct impact on our revenues. Future cash flows, if any, are impossible to predict at this time. We may raise cash from sources other than our operations. Our only other source for cash at this time is loans from our Chairman, Andy Fan. Any change in our strategic business direction may take years to complete and future cash flows, if any, are impossible to predict at this time.
Results of Operations
The following table provides a comparison of a summary of our results for the fiscal years ended December 31, 2016 and 2015.
Revenue from Operations
For the fiscal year ended December 31, 2016, there was no revenue.
General and Administrative Expenses
During the fiscal year ended December 31, 2016, general and administrative expenses of $27,852 consist of those expenses related to the payment of our Securities and Exchange Commission (“SEC”) and Exchange Act reporting filing expenses, including associated accounting fees and any potential business ventures.
General and Administrative Expenses - Related Party
During the fiscal year ended December 31, 2016, operating expenses of $23,957 consist of those expenses related to the management fees paid to the Service Provider.
Net Income (Loss)
As a result of the factors described above, we show a net loss of ($18,955,230) for the fiscal year ended December 31, 2016 as compared to ($69,228) for the fiscal year ended December 31, 2015. Management believes the loss from operations is consistent with the change in direction.
Liquidity and Capital Resources
General
At December 31, 2016, we had cash and cash equivalents of $21,316. We have met our cash needs through cash flows from officer loans throughout the current fiscal year. Our cash requirements are generally for general and administrative activities. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements and therefore we will require additional funding.
In the event we are unable to generate sufficient funds to continue our business efforts or if we are pursued by a larger company for a business combination, we will analyze all strategies to continue the Company and maintain or increase shareholder value. Under these circumstances, we would consider a merger, acquisition, joint venture, strategic alliance, a roll-up, or other business combination for the purposes of continuing the business and maintaining or increasing shareholder value. Management believes its responsibility to maintain shareholder value is of paramount importance, which means we should consider the aforementioned alternatives in the event funding is not available on favorable terms to us when needed.
Operating activities
Our continuing operating activities used cash of ($47,065) and ($64,711) for the fiscal years ended December 31, 2016 and 2015, respectively.
Investing Activities
We neither generated nor used funds in continuing investing activities during the fiscal years ended December 31, 2016 or 2015.
Financing activities
Net cash from our financing activities was $0 for the fiscal year ended December 31, 2016, compared to $110,000 for the fiscal year ended December 31, 2015.
As of December 31, 2016, our current assets exceed our liabilities.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We had no ongoing business or other source of income and incurred a net loss of ($18,955,230) for the fiscal year ended December 31, 2016. These factors raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.
We are currently evaluating acquisitions and other business opportunities. The ability to continue as a going concern is dependent upon us generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. No assurance can be given that we will be successful in these efforts.
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.
Inflation
Inflation does not materially affect our business or the results of our operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies
We prepare our financial statements in accordance with generally accepted accounting principles of the United States (“GAAP”). GAAP represents a comprehensive set of accounting and disclosure rules and requirements. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates. We use historical data to assist in the forecast of our future results. Deviations from our projections are addressed when our financials are reviewed on a monthly basis. This allows us to be proactive in our approach to managing our business. It also allows us to rely on proven data rather than having to make assumptions regarding our estimates.
Management does not believe that our actual results are related to any sensitivity in estimates made by management. The year-end consistency of our results has shown that our prior year’s historical data is the best projector of our future results.
Recent Accounting Pronouncements
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on our financial statements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item pursuant to Item 305 of Regulation S-K.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our audited financial statements as of and for the fiscal years ended December 31, 2016 and 2015 are set forth on pages to immediately following the signature page to this annual report. See Item 15 for a list of the financial statements included herein.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On June 29, 2015, the Board of Directors of Sichuan Leaders Petrochemical Company (the “Company”) approved the withdrawal of DKM Certified Public Accountants (“DKM”) as the Company’s independent registered public accounting firm, effective as of June 29, 2015.
On July 1, 2015, the Board of Directors of the Company approved the engagement of Stevenson & Company CPAS LLC as the Company’s new independent registered public accounting firm, effective as of June 29, 2015. Stevenson & Company CPAS LLC conducted the review engagement on the Company’s quarterly Financial Statements commencing with the June 30, 2015 quarterly review.
On June 1, 2017, the Board of Directors of Sichuan Leaders Petrochemical Company (the “Company”) approved the withdrawal of Stevenson & Company CPAS LLC (Stevenson’s) as the Company’s independent registered public accounting firm, effective as of June 1, 2017.
On June 1, 2017, the Board of Directors of the Company approved the engagement of MaloneBailey, LLP as the Company’s new independent registered public accounting firm, effective as of June 1, 2017
For more information regarding our change in accountants, see our Current Report on Form 8-K dated and filed with the SEC on June 1, 2017.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure.
Our management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report. Based upon that evaluation, management has concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were not effective.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to management and to the Board regarding the preparation and fair presentation of published financial statements.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of management and our directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework - Guidance for Smaller Public Companies (the COSO criteria). Based on our assessment, management identified material weaknesses related to: (i) our internal audit functions; (ii) a lack of segregation of duties within accounting functions; and the lack of multiple levels of review of our accounting data. Based on this evaluation, our management concluded that as of December 31, 2016, we did not maintain effective internal control over financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with any policies and procedures may deteriorate. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. To the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals. With proper funding we plan on remediating the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.
A material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board Auditing Standard No. 5) or combination of control deficiencies, that results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
There is no information required to be disclosed in a report on Form 8-K during the fourth quarter of the fiscal year ended December 31, 2016 but not reported, whether or not otherwise required by this Form 10-K.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
The following table sets forth the name and age of our sole director and executive officer. Our By-Laws provide for not less than one and not more than fifteen directors. Directors are elected annually by the shareholders to serve until the next annual meeting of the shareholders and until their successors are duly elected and qualified.
Background of Directors and Executive Officers
Andy Fan was appointed as a director and Chairman of the Board on December 15, 2012. He was subsequently appointed as Chief Financial Officer and Treasurer on August 7, 2013 and Chief Executive Officer and President on October 21, 2013. Mr. Fan is a prominent Chinese-American businessman with outstanding connections within the Chinese government, long standing relationships with the Chinese media and a strong following in China where he has appeared in various forms of media. He once served as the interpreter for China’s Head of State - Prime Minister Li Peng in 1987, was awarded a full scholarship thereafter for graduate study in the U.S., where he was introduced to former U.S. President William Clinton by the University President and subsequently served as former President Clinton’s Chinese interpreter.
Mr. Fan has written 15 books since 2004, including one describing his experience serving as President Clinton’s Chinese interpreter titled “Clinton and My Life,” which became the No. 1 best seller in China in June 2011. His 15 books are popular in China and have made him a well-respected and sought-after public speaker, as well as a frequent guest on Chinese television programs. He has also been featured in numerous Chinese magazines, including “Chinese Business Leader,” “China Celebrity,” “China Private Capital,” “World Chinese Businessman,” “Discovery,” “Commerce” and “The View,” among others. Due to his achievements and notoriety in China, he has been invited as the guest of honor and/or speaker by many prominent organizations, such as being invited to the Nobel Laureates Beijing Forum and Forbes China City Investment Forum in 2006. In 2009, in celebration of the 60th anniversary of the founding of the People’s Republic of China, Mr. Fan was chosen to be one of “China’s 60 Role Models in 60 Years,” and his portrait was printed on a Chinese Postage Stamp that same year.
Other Directorships Held in Companies Subject to the Exchange Act Reporting Requirements
Mr. Fan is currently the sole director and executive officer of AF Ocean Investment Management Company. Its common stock is quoted on the OTCQB marketplace under the symbol “AFAN.”
Mr. Fan is currently the sole director and executive officer of ChinAmerica Andy Movie Entertainment Media Co. Its common stock is quoted on the OTCQB marketplace under the symbol “CAME.”
Involvement in Certain Legal Proceedings
We have no pending legal proceedings and are not currently involved in any legal matters to disclose in Regulation S-K, Item 401(f).
Section 16(a) Beneficial Ownership Reporting Compliance
Our shares of common stock are registered under the Exchange Act, and therefore our officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review of reports submitted to us during the fiscal year ended December 31, 2016, the following table sets forth the name of any such person that failed to file the required forms on a timely basis, including the number of late reports, the number of transactions not reported on a timely basis and any known failure to file a required form.
Name
Number of late reports
Number of transactions not reported timely
None
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors. In addition to the Code of Business Conduct and Ethics, our principal executive officer, principal financial officer and principal accounting officer are also subject to written policies and standards that are reasonably designed to deter wrongdoing and to promote: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to the SEC and in other public communications made by us; compliance with applicable government laws, rules and regulations; the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and accountability for adherence to the code.
We have posted the text of our Code of Business Conduct and Ethics on our Internet website, www.slpc1.com. We intend to disclose future amendments to, or waivers from, certain provisions of our Code of Business Conduct and Ethics, if any, on our above Internet website within four business days following the date of such amendment or waiver.
Corporate Governance
Nominating Committee
We have neither a nominating committee for persons to be proposed as directors for election to the Board nor a formal method or procedures for shareholders to recommend nominees to the Board, because we have limited operations and have only one director. We also do not have any restrictions on shareholder nominations under our articles of incorporation or by-laws. Our sole director, who is also our sole executive officer and the beneficial owner of approximately 89% of our issued and outstanding common shares, is able to effectively manage the issues typically considered by a nominating committee. If we do establish a nominating committee or adopt procedures by which shareholders may recommend nominees to the Board, we will disclose this change to our procedures in recommending nominees to the Board.
Audit Committee and Audit Committee Financial Expert
We have not established an audit committee, nor any other designated committee of the Board, because we have limited operations and have only one director.
We do not have an “audit committee financial expert.” We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our current status as a shell company, we believe the services of a financial expert are not warranted.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Executive Officer Compensation
During the fiscal years ended December 31, 2016 and 2015, we did not pay any compensation (cash, equity, incentive, deferred or otherwise) to our executive officers or enter into any verbal or written agreement to pay such compensation. Cash compensation amounts will be determined in the future based on the availability of funds, services to be rendered and time devoted to our business. Other elements of compensation, if any, will be determined at that time or at other times in the future.
The following table sets forth information concerning the annual and long term compensation of our Chief Executive Officer, and the executive officers who served at the end of the fiscal year December 31, 2016, for services rendered in all capacities to us. The listed individuals shall hereinafter be referred to as the “Named Executive Officers.”
Summary Compensation Table - Officers
(1) The Company has not entered into any employment contracts with Mr. Fan.
Outstanding Equity Awards at Fiscal Year-End
No individual grants of stock, options to purchase stock or other equity incentive awards have been made to any executive officer during the fiscal year ended December 31, 2016, although we may choose to adopt a plan for equity awards in the future.
Director Compensation
We do not currently have an established policy to provide any type of compensation (cash, equity, incentive, deferred or otherwise) to our sole director for his services in that capacity during the fiscal year ended December 31, 2016, although we may choose to adopt a policy in the future.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following tables set forth information with respect to the beneficial ownership of our outstanding common stock as of December 31, 2016 by: (1) each director; (2) each named executive officer; (3) all of our director and executive officers as a group, and (4) each shareholder identified as beneficially owning greater than 5% of our outstanding shares of common stock. Beneficial ownership means sole or shared voting power or investment power with respect to a security. We have been informed that all shares shown are held of record with sole voting and investment power. To our knowledge, none of the shares reported below are pledged as security.
The percentage of outstanding common shares has been calculated based upon 43,425,000 shares of common stock outstanding on December 31, 2016. There are no stock options, warrants and/or other convertible or exercisable securities outstanding.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
Except as described below, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction during the last two fiscal years in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years.
Commencing June 1, 2014, we engaged AF Ocean Investment Management Company (the “Service Provider”), for access to and use of office space at a location leased by the Service Provider from a third party, for legal services, management and accounting related services including, without limitation, preparing periodic and other reports required to be filed under the Securities Exchange Act of 1934, preparing financial reports, bookkeeping, managing their websites, handling previous employee matters as they should arise, and related governmental filings, handling advertising matters, and processing payables. (collectively, the “Services”).
The agreement with the Service Provider is for an initial term of one year, and automatically renews for another year unless we provide written notice of cancellation at least 60 days prior to the expiration of the initial term or any renewal term. We pay the Service Provider a management fee of $1,996 per month. Our sole officer, director and majority shareholder, Andy Fan, is the sole officer and director of the Service Provider. Mr. Fan is also the beneficial owner of approximately 37% of the Service Provider’s outstanding common stock, on a fully-diluted basis.
Director Independence
We are not a listed issuer and our securities are not listed on any national securities exchange or an inter-dealer quotation system which requires that a majority of the Board be independent. With just a sole director, he functions as and performs the duties and responsibilities typically carried out separately by committees. We evaluated independence pursuant to the standards for director independence set forth in Nasdaq Listing Rule 5605. Andy Fan is not considered independent under Nasdaq Listing Rule 5605(a)(2) because he is an “executive officer” of the Company as such term is defined in Nasdaq Listing Rule 5605(a)(1).
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Audit Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-Q and other services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
Audit-Related Fees: The aggregate fees billed in each of the last two fiscal years for assurance and related services rendered by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under the previous item, Audit Fees.
Tax Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning. The fees in fiscal year 2015 are for preparing our 2014 tax return.
All Other Fees: The aggregate fees billed in each of the last two fiscal for products and services provided by the principal accountant other than those disclosed above.
Audit Committee Pre-Approval Policies and Procedures
We do not currently have an audit committee because we have only one director who is also our sole executive officer. However, the engagement of MaloneBailey, LLP as our independent registered public accounting firm for the audit of our annual financial statements for fiscal years ended December 31, 2016 and 2015 was pre-approved by our sole director in order to assure that the services performed by MaloneBailey, LLP do not impair their independence from us. We paid MaloneBailey, LLP for their services and therefore they have no direct or indirect interest in us.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this annual report:
(1) Financial Statements
· Reports of Independent Registered Public Accounting Firm
· Balance Sheets at December 31, 2016 and December 31, 2015
· Statements of Operations for the years ended December 31, 2016 and December 31, 2015
· Statements of Stockholders’ Equity for the years ended December 31, 2016 and December 31, 2015
· Statements of Cash Flows for the years ended December 31, 2016 and December 31, 2015
· Notes to the Financial Statements
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or notes thereto.
(3) Exhibits
_______________
* Incorporated herein by reference to Sichuan Leaders Petrochemical Company’s Registration Statement on Form S-1 filed with the SEC on August 7, 2012.
** Incorporated herein by reference to Sichuan Leaders Petrochemical Company’s Current Report on Form 8- K filed with the SEC on December 21, 2012.
*** Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SICHUAN LEADERS PETROCHEMICAL COMPANY
Dated: July 25, 2017 By:
/s/ANDY FAN
Andy Fan
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: July 25, 2017 By:
/s/ANDY FAN
Andy Fan
Chief Executive Officer, Chief Financial Officer,
President, Chairman of the Board
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Sichuan Leaders Petrochemical Company
We have audited the accompanying balance sheet of Sichuan Leaders Petrochemical Company (the “Company”) as of December 31, 2016, and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended. These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sichuan Leaders Petrochemical Company as of December 31, 2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
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 suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
July 24, 2017
SICHUAN LEADERS PETROCHEMICAL COMPANY
Balance Sheets
As of December 31,
The accompanying notes are an integral part of these financial statements.
SICHUAN LEADERS PETROCHEMICAL COMPANY
Statements of Operations
Year Ended December 31,
The accompanying notes are an integral part of these financial statements.
SICHUAN LEADERS PETROCHEMICAL COMPANY
Statements of Changes in Stockholders’ Equity
Year Ended December 2016, and 2015
The accompanying notes are an integral part of these financial statements.
SICHUAN LEADERS PETROCHEMICAL COMPANY
Statements of Cash Flows
Year Ended December 31,
The accompanying notes are an integral part of these financial statements.
Sichuan Leaders Petrochemical Company
Notes to Financial Statements
December 31, 2016
NOTE 1. NATURE OF BUSINESS
Organization
Sichuan Leaders Petrochemical Company (“SLPC” or the “Company”) was incorporated under the name Quality WallBeds, Inc. on June 29, 2000 in the state of Florida. The Company was a furniture retailer specializing wall beds, closets and shelving. The Company had a single retail location in Saint Petersburg, Florida. The Company discontinued the Florida wall bed operations in May, 2013.
Since May 2013, we have been exploring various opportunities within the petrochemical field for the acquisition of companies in Asia that are wholesalers or retailers of petrochemical products for the automotive industry. Management has sought to acquire companies through mergers and acquisitions or in the alternative to acquire the rights to distribute products throughout the People’s Republic of China and Southeast Asia.
Management has determined that the opportunities in the petrochemical field in Asia have declined in recent years. Accordingly, we have expanded our business plan to include mergers and acquisitions of non-petrochemical companies in Asia and the United States.
The Company’s headquarters are located in Ellenton, Florida.
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had no ongoing business or other source of income and incurred a net loss of ($18,955,230) for the twelve month year ended December 31, 2016. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.
The Company is currently evaluating acquisitions and other business opportunities. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. No assurance can be given that the Company will be successful in these efforts.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Related Party
Accounting Standards Codification Section 850 (ASC 850), Related Party Disclosures provides requirements related to management’s disclosure of transactions with related parties. See NOTE 4 for Related Party Disclosures.
Basis of Presentation
The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principles require 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 of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates.
Use of Estimates
The preparation of financial statements in conformity with US GAAP 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 of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The majority of cash is maintained with a major financial institution in the United States. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2016 the Company’s deposits did not exceed the amount of insurance provided on such deposits. All amounts referred to herein are in US Dollars unless otherwise noted.
Financial Instruments
The Company’s financial assets are comprised of cash and cash equivalents and Prepaid expenses. Our liabilities consist of accounts payable.
Our financial assets and liabilities are carried at fair value, which is described in this Note 3. The carrying values for current financial assets and liabilities, such as accounts receivable and accounts payable, approximate fair value due to the short maturity of such instruments.
Financial instruments that could subject us to concentrations of credit risk are primarily cash and cash equivalents. Our cash and cash equivalents are within FDIC limits.
Fair Value of Financial Instruments
FASB ASC 820-10 “Fair Value Measurements and Disclosures” defines fair value 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 on the measurement date. This ASC also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy are described below:
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable data by correlation or other means.
Level 3
Inputs that are both significant to the fair value measurement and unobservable.
Currently there are no assets that are required to be fair valued.
The Company’s financial instruments consist principally of cash, prepaid expenses and accounts payable. The recorded values of all these financial instruments approximate their current fair values because of the short term nature of these financial instruments.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The Company accounts for taxes in accordance with ASC 740-10, ” Accounting for Uncertain Income Tax Positions.” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of December 31, 2016, tax years 2015, 2014, and 2013, remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.
Stock-Based Compensation
The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition provisions ASC Topic 505-50. The Company estimates the fair value of stock options at the grant date by using the Black-Scholes option-pricing model. No stock based compensation was issued or outstanding during the years ended December 31, 2016 or 2015.
Net Earnings (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. No potentially dilutive debt or equity instruments were issued and outstanding during the years ended December 31, 2016 and 2015.
Recent Accounting Pronouncements
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company financial statements.
NOTE 4. RELATED PARTY TRANSACTIONS
We share the same Chief Executive Officer and controlling shareholder as the Service Provider. We pay the Service Provider $1,996 per month for access to and use of office space at a location leased by the Service Provider from a third party, legal services, management and accounting related services including, without limitation, preparing periodic and other reports required to be filed under the Securities Exchange Act of 1934, preparing financial reports, bookkeeping, managing their websites, handling previous employee matters, and related governmental filings, handling advertising matters, and processing payables. (collectively, the “Services”).
In February 2015, the majority shareholder loaned the company $110,000 to fund the operations of the company.
On November 10, 2016, Chairman Andy Fan offered to accept 12,670,000 shares of common stock, at a price of $0.01 per share, in exchange for cancelling the debt. However, as per FASB ASC 820-10 “Fair Value Measurements and Disclosures the issuance should be valued at the closing price on the date of the issuance, which was $1.50. The difference in value is disclosed on the income statement under loss on conversion in the amount of $18,895,000.
NOTE 5. INCOME TAXES
As of December 31, 2016 and December 31, 2015, the Company has net operating losses from operations. The carry forwards expire through the year 2029. The Company’s net operating loss carry forward may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. A valuation allowance has been applied due to the uncertainty of realization.
The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying the United States Federal tax rate of 34% and State tax rate of 3.3% to income before taxes), as follows:
The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
As of December 31, 2016, the Company has net operating losses from operations of 219,000. The carry forwards expire through the year 2023. The Company’s net operating loss carry forward may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. A valuation allowance has been applied due to the uncertainty of realization.
The Company’s net deferred tax asset as of December 31, 2016 and December 31, 2015 is as follows:
Summary of Net Deferred Tax Asset
The tax returns for 2013 through 2016 remain open for inspection by federal and state taxing authorities
NOTE 6. COMMITMENTS AND CONTINGENCIES
Related Party
The controlling shareholders have pledged support to fund continuing operations, as necessary. From time to time, the Company is dependent upon the continued support of these parties, through temporary advances or through arrangements of their personal credit. However there is no written commitment to this effect.
During the twelve month period ended December 31, 2014, the Company entered into a one year agreement with AF Ocean Investment Management Company to provide management services to the Company. The Company pays AF Ocean Investment Management Company $1,996 per month.
The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
The Company does not have employment contracts with its key employees, including the officers of the Company.
Leases And Facility
The office space is rented by AF Ocean Investment Management Company (Service Provider), and the Company pays $1,996 per month to Service Provider for management services provided which includes the Company’s rent.
Legal Matters
From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.
NOTE 7. STOCKHOLDERS’ EQUITY
In February, 2015, the Company received 2 Promissory Notes from Andy Fan evidencing a loan from Andy Fan to the Company in the amount of One Hundred Ten Thousand and No/100 Dollars ($110,000). Chairman Andy Fan agreed to cancel the debt in exchange for 12,670,000 shares of stock.
NOTE 8. SUBSEQUENT EVENTS
On May 31, 2017, the Company entered into a transactional agreement with VentureVest Capital (VentureVest) in a consulting capacity to assist in bringing the Company’s delinquent filings current. VentureVest has offered to loan the Company an estimated amount of $19,000, and has agreed to accept promissory notes for each issuance of funds on the date the transfer of funds takes place. Furthermore, the Company has agreed that VentureVest will have the exclusive right to represent the Company and to locate a buyer for the common stock owned by Mr. Fan.
On May 31, 2017, VentureVest has agreed to accept the 1st convertible Promissory Note for the total amount of $6,000. These convertible promissory notes will be issued at a rate of $0.05 per share.