Item 1. Business.
Overview
Inspired Builders, Inc., a Nevada Corporation, was located in Boston, Massachusetts. On January 13, 2012, pursuant to the change of control transaction, we relocated to Santa Monica, California. Until the change of control transaction, we focused on the real estate construction services business through a residential property repair and home improvement business. .
Since then we have redirected the Company’s focus to acquiring, investing in, developing and managing real estate properties and related investments. We have evaluated numerous real estate investment opportunities emphasizing commercial real estate development. Any such efforts in real estate will require substantial financial and management resources, which the Company does not currently possess. Therefore, while we will seek to acquire these resources as a part of our business plans, there can be no assurance of our success, and therefore, in our ability to enter the real estate investment or any other market.
Agreement to Purchase of Duval Property
On June 24, 2013 the Company entered into an agreement with a related party to purchase a parcel of undeveloped land in Duval County, Florida. The purchase price for the Duval property was $1,350,000, payable as to $750,000 by the Company’s delivery of a 3% mortgage in the amount of $750,000, which is due June 15, 2014. The $600,000 balance of the purchase price was paid by approving the issuance to the seller of 100,000 shares of the Company’s common stock, $0.001 par value per share, which was valued by the parties at $6.00 per share. Due to the related party nature of this transaction, the Company’s carrying value was deemed to be the historical basis of the property, $307,504. The difference between the purchase price and the historical basis was treated as a deemed distribution and recorded against Additional Paid In Capital.
Joint Venture with Development Property Holdings, Inc.
As previously disclosed on Form 8-K filed on December 31, 2013, on December 10, 2013, we entered into a joint venture with Development Property Holdings, Inc. a California corporation, (the “Joint Venture”) to enter into and become a Florida joint venture for the purpose of acquiring certain commercial real property in the State of Florida. The Joint Venture will be vested 50% by each partner and all decisions, costs, expenses and profits will be divided evenly between the two partners. A copy of the Joint Venture Agreement is attached hereto as Exhibit 10.6.
To date, the Joint Venture has not executed and closed on any properties and is still searching for its first project.
Employees
As of January 7, 2014, other than our Chief Executive Officer, we have 0 employees.
Item 1A.
Item 1A. Risk Factors.
Smaller reporting companies are not required to provide the information required by this item.
Item 1B.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Item 2. Properties.
Our principal executive office is now located at 233 Wilshire Boulevard, Suite 830, Santa Monica, California 90401, and our telephone number is (310) 526-8400. We do not have a lease agreement for this property. This property is owned by our sole officer and director and he allows us to use the space to run the business.
Item 3.
Item 3. Legal Proceedings.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting our company, our common stock, or of our companies officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
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.
Our common stock commenced quotation on the OTC Bulletin Board under the trading symbol “ISRB” on April 8, 2011. The OTC Bulletin Board is generally considered to be a less active and efficient market than the NASDAQ Global Market, the NASDAQ Capital Market or any national exchange and will not provide investors with the liquidity that the NASDAQ Global Market, the NASDAQ Capital Market or a national exchange would offer. Since being listed on the OTCBB in April 2011 our common stock has not been traded.
Recent Sales of Unregistered Securities
None.
Holders
As of February 25, 2014, we had approximately 27 record holders.
Dividends
No dividends were declared on our common stock in the year ended September 30, 2013, and it is anticipated that cash dividends will not be declared on our common stock in the foreseeable future. Our dividend policy is subject to the discretion of our board of directors and depends upon a number of factors, including operating results, financial condition and general business conditions. Holders of common stock are entitled to receive dividends as, if and when declared by our board of directors out of funds legally available therefor. We may pay cash dividends if net income available to stockholders fully funds the proposed dividends, and the expected rate of earnings retention is consistent with capital needs, asset quality and overall financial condition.
Securities Authorized for Issuance under Equity Compensation Plan
None.
Item 6.
Item 6. Selected Financial Data.
Smaller reporting companies are not required to provide the information required by this item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Conditions and Results Of Operations.
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Plan of Operations
We have commenced limited operations and we will require outside capital to implement our business model.
Inspired Builders, Inc., a Nevada Corporation, was located in Boston, Massachusetts. On January 13, 2012, pursuant to the change of control transaction, we relocated to Santa Monica, California. Until the change of control transaction, we focused on repairing and providing home improvements for the homeowners.
Going forward, we expect to redirect the Company’s focus to acquiring, investing in, developing and managing real estate properties and related investments. Any such efforts will require substantial financial and management resources, which the Company does not currently possess. Therefore, while we will seek to acquire these resources as a part of our business plans, there can be no assurance of our success, and therefore, in our ability to enter the real estate investment or any other market.
Limited Operating History
We have generated no independent financial history and have not previously demonstrated that we will be able to expand our business. Our business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.
Results of Operations
Comparison of the year ended September 30, 2013 and 2012
For the fiscal year ended September 30, 2013, we had revenues of $0, as compared to $0 in the same period in 2012. Operating expenses for the year ended September 30, 2013 totaled $97,748 resulting in a net loss of $132,799, as compared to operating expenses of $212,539 and a net loss of $228,980 for the year ended September 30, 2012. Expenses for the year ended September 30, 2013 consisted of $97,748 in general and administrative expenses, as compared to $212,539 of general administrative expenses for the same period in 2012.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. We have been funding our operations through the sale of our common stock.
Our net revenues are not sufficient to fund our operating expenses. At September 30, 2013, we had a cash balance of $857. Since inception, we raised $6,500 from the sale of common stock to fund our operating expenses, pay our obligations, and grow our company. We currently have no material commitments for capital expenditures. We may be required to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We estimate that based on current plans and assumptions, that our available cash will not be sufficient to satisfy our cash requirements under our present operating expectations, without further financing, for up to 12 months. We do not have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations. We will need to raise significant additional capital to fund our operating expenses, pay our obligations, and grow our company. We do not anticipate that we will be profitable in 2014. Therefore our future operations will be dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations.
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.
Critical Accounting Policies and Estimates
While our significant accounting policies are more fully described in Note 1 to our financial statements for the period ended September 30, 2013, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, recovery of long-lived assets, income taxes, and the valuation of real estate and equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.
Revenue recognition
We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. For all revenue sources discussed below, in accordance with ASC 605-45 “Principal Agent Considerations”, we recognize revenue net of amounts retained by third party entities pursuant to revenue sharing agreements. Our specific revenue recognition policies are as follows:
We recognize revenue from the acceptance of a home remodeling contract and the signing of the contract when the project is completed and collection is reasonably assured.
Stock-based compensation
We account 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. There were no options outstanding as of September 30, 2013. We account for non-employee share-based awards in accordance with ASC Topic 505-50.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company’s present or future financial statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Smaller reporting companies are not required to provide the information required by this item.
Item 8.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of:
Inspired Builders, Inc.
We have audited the accompanying balance sheet of Inspired Builders, Inc. (the “Company”) as of September 30, 2013, and the related statement of operations, statement of stockholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’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 the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 Inspired Builders, Inc. as of September 30, 2013 and the results of its operations and its cash flows for the period 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 3 in the financial statements, the Company has a net loss of $132,799, an accumulated deficit of $432,974 and a negative cash flow from continuing operations of $ 61,628. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liggett, Vogt & Webb, P.A.
Certified Public Accountants
Boynton Beach, Florida
February 28, 2014
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Inspired Builders Inc.
We have audited the accompanying balance sheet of Inspired Builders Inc. as of September 30, 2012 and the related statements of operations, stockholders' deficit, and cash flows for the year in the period ended September 30, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 consolidated financial position of Inspired Builders Inc. as of September 30, 2012, and the results of its operations and its cash flows for the year in the period ended September 30, 2012, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Donahue Associates LLC
Monmouth Beach, N.J.
January 15, 2013
See accompanying notes to financial statements.
See accompanying notes to financial statements.
On June 24, 2013 the Company authorized the issuance of 100,000 shares of common stock and a note payable of $750,000 as consideration for the purchase of real estate from a related party. The real estate was recorded at its historical cost and the difference between the historical costs and the consideration paid was treated as a return of capital of $442,496.
See accompanying notes to financial statements.
See accompanying notes to financial statements.
Inspired Builders, Inc.
Notes to Financial Statements
For the Years Ended September 30, 2013 and 2012
1. Nature of Operations
Inspired Builders, Inc. (the “Company”) was incorporated in the State of Nevada in February 2010. The Company is a construction company that specializes in residential home repair and home improvements. The Company contracts with homeowners to build custom home improvements, including shelving for closets, bathroom remodeling, upgrading home entertainment centers and replacing flooring. In May 2013, the Company’s board of directors determined that conversion of the Company’s corporate status to that of a real estate investment trust (a “REIT”) would best support the company’s strategic direction. Accordingly, the board passed and adopted a resolution for the Company to be treated as a REIT. As of February 28, 2014, the Company has not completed the necessary filings to change its status with the Internal Revenue Services.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following; estimates of the probability and potential magnitude of contingent liabilities, the valuation allowance for deferred tax assets due to continuing operating losses, valuation of shares issued in connection with the purchase of real estate, the valuation of the real estate and the evaluation of any impairment on the real estate.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.
Cash
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents at September 30, 2013 and 2012.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.
Fair Value of Financial Instruments
For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts of cash, loan payable, accounts payable and accrued expenses reported in the balance sheets are estimated by management to approximate fair value at September 30, 2013 and 2012.
Revenue Recognition
The Company records revenue for services rendered when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product/service is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured.
Income Taxes
The Company accounts for income taxes in accordance with generally accepted accounting principles which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between financial statement and income tax bases of assets and liabilities that will result in taxable income or deductible expenses in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets and liabilities to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period adjusted for the change during the period in deferred tax assets and liabilities.
The Company follows the accounting requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the positions will be sustained upon examination by the tax authorities. It also provides guidance for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of September 30, 2013 and September 30, 2012, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. All tax returns from fiscal years 2010 to 2013 are subject to IRS audit.
Earnings per share
In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
The Company did not have any potential common stock equivalents at September 30, 2013 and 2012.
Recent accounting pronouncements
Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company’s present or future financial statements.
3. Going Concern
As reflected in the accompanying financial statements, the Company has a net loss of $137,399 and net cash used in operations of $61,628 for the year ended September 30, 2013. In addition, the Company has not had construction revenues since May 2011 and the only prospect for positive cash flow is through the issuance of common stock or debt. If the Company does not begin to generate sufficient revenue or raise additional funds through a financing, the Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. The Company will require additional funding to finance the growth of its future operations as well as to achieve its strategic objectives. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and generate revenue. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
4. Real Estate
On June 24, 2013, the Company entered into an agreement with a related party to purchase a parcel of undeveloped land in Duval County, Florida. The purchase price for the Duval property was $1,350,000, payable as $750,000 by the Company’s delivery of its 3% note and mortgage, due June 15, 2014. The $600,000 balance of the purchase price was paid by approving the issuance to the seller of 100,000 shares of the Company’s common stock. The $0.001 par value per share was valued by the parties at $6.00 per share, based on the closing price of the stock on the date of the closing. In accordance with SAB 7310.1, transfers of nonmonetary assets for stock or other consideration of the registrant are recorded at the predecessor cost. Accordingly, the Company recorded the value of the real estate acquired at the historical basis of $307,504.
5. Employment Agreement
On September 1, 2013 the Company entered into a three year employment contract with its CEO. The CEO is to be paid $10,000 per month plus reimbursement for expenses and bonuses as determined by the board. The CEO will be entitled to one week paid vacation and is subject to a one year non-compete agreement at the end of the employment contract. As of September 30, 2013, the Company has accrued $10,000, for amounts due to the CEO.
6. Mortgage Payable - Related Party
On June 24, 2013 the Company entered into an agreement with a related party to purchase a parcel of undeveloped land in Duval County, Florida. The purchase price for the Duval property was $1,350,000, payable as $750,000 by the Company’s delivery of its 3% note and mortgage, due June 15, 2014. The $600,000 balance of the purchase price was paid by approving the issuance to the seller of 100,000 shares of the Company’s common stock. The $0.001 par value per share was valued by the parties at $6.00 per share, based on the closing price of the stock on the date of the closing. As of September 30, 2013 the Company has accrued interest of $6,125 due on the mortgage.
7. Notes Payable - Related Parties
On January 13, 2012 the Company entered into a 12 month unsecured promissory note in the amount of $211,000. Interest accrues in arrears on the outstanding principal at the rate of ten percent (10.00%) per annum. Interest shall be payable on the last day of each quarter, commencing March 30, 2012, and continuing until the maturity date. Should the maker fail to pay the entire principal and accrued interest by the maturity date, the maker agrees that the interest rate shall increase to twelve percent (12.00%) per annum. On May 10, 2013, the Company and the related party agreed to extend the maturity of the loan for an additional year or until January 13, 2014. The loan maturity dates were further extended to January 13, 2015 on January 13, 2014. On May 22, 2012, the Company borrowed an additional $32,714 from the related party, with the same terms. On September 17, 2012, the Company borrowed an additional $22,033 from the related party, with the same terms. On February 7, 2013, the Company borrowed an additional $28,773 from the related party, with the same terms, and on July 31, 2013, the Company borrowed an additional $30,000 from the related party, with the same terms. The total outstanding principal at September 30, 2013 amounted to $324,529. Accrued interest at September 30, 2013, and September 30, 2012, amounted to $45,768 and $16,341, respectively.
8. Stockholders’ Equity
On June 24, 2013, the Company approved the issuance of 100,000 shares of common stock to a related party as partial consideration for the purchase of real estate. The shares were valued at the historical cost of the consideration given. The difference between the historical cost and the consideration paid was treated as a return of capital of $442,496.
9. Income Taxes
The increase in the valuation allowance for the year ended September 30, 2013 was an increase of $52,900.
10. Commitments and Contingencies
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
11. Concentration of Credit Risk
The Company relies heavily on the support of its president and majority shareholder. A withdrawal of this support, for any reason, will have a material adverse effect on the Company’s financial position and its operations.
12. Related Party Transaction
On January 13, 2012 the Company entered into a 12 month unsecured promissory note in the amount of $211,000. Interest accrues in arrears on the outstanding principal at the rate of ten percent (10.00%) per annum. Interest shall be payable on the last day of each quarter, commencing March 30, 2012, and continuing until the maturity date. Should the maker fail to pay the entire principal and accrued interest by the maturity date, the maker agrees that the interest rate shall increase to twelve percent (12.00%) per annum. On May 10, 2013, the Company and the related party agreed to extend the maturity of the loan for an additional year or until January 13, 2014. The loan maturity dates were further extended to January 13, 2015 on January 13, 2014. On May 22, 2012, the Company borrowed an additional $32,714 from the related party, with the same terms. On September 17, 2012, the Company borrowed an additional $22,033 from the related party, with the same terms. On February 7, 2013, the Company borrowed an additional $28,773 from the related party, with the same terms, and on July 31, 2013, the Company borrowed an additional $30,000 from the related party, with the same terms Total outstanding principal at September 30, 2013 amounted to $324,529. Accrued interest at September 30, 2013, and September 30, 2012, amounted to $45,768 and $16,341, respectively.
On June 24, 2013 the Company entered into an agreement with a related party to purchase a parcel of undeveloped land in Duval County, Florida. The purchase price for the Duval property was $1,350,000, payable as $750,000 by the Company’s delivery of its 3% note and mortgage, due June 15, 2014. The $600,000 balance of the purchase price was paid by approving the issuance to the seller of 100,000 shares of the Company’s common stock. In accordance with SAB 7310.1, transfers of nonmonetary assets for stock or other consideration of the registrant are recorded at the predecessor cost. Accordingly, the Company recorded the value of the real estate acquired at the historical basis of $307,504. As of September 30, 2013 the Company recorded accrued interest of $6,125
On September 1, 2013 the Company entered into a three year employment contract with its CEO. The CEO is to be paid $10,000 per month plus reimbursement for expenses and bonuses as determined by the board. The CEO will be entitled to one week paid vacation and is subject to a one year non-compete agreement at the end of the employment contract. As of September 30, 2013, the Company has accrued $10,000, for amounts due to the CEO.
13. Subsequent Events
On November 14, 2013, a related party advanced the Company $19,960 for working capital.
On November 13, 2013, a related party entered into an unsecured note payable for $25,000 with an interest rate of 10% due November 13, 2014.
On December 20, 2013, a related party advanced the Company $2,500 for working capital.
On January 13, 2014, a related party entered into an unsecured note payable for $3,352 with an interest rate of 5% due January 13, 2015.
On January 7, 2014, a related party advanced the Company $5,000 for working capital.
On January 24, 2014, a related party advanced the Company $10,000 to pay for 1 months salary to our Chief Executive Officer.
In December 2013 the Company entered into a Joint Venture Agreement with Development Property Holdings, Inc. a California corporation, to enter into and become a Florida joint venture for the purpose of acquiring certain commercial real property in the State of Florida. The Joint Venture will be vested 50% by each partner and all decisions, costs, expenses and profits will be divided evenly between the two partners. To date, the Joint Venture has not executed and closed on any properties and is still searching for its first project.
On February 7, 2014, the Company issued 100,000 shares to the seller of the property, a related party, which closed on June 24, 2013.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) (the Company’s principal executive officer) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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 the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2013. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of September 30, 2013, the Company’s internal control over financial reporting was not effective for the purposes for which it is intended.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over our financial reporting as of September 30, 2013 the Company determined that the following items constituted a material weakness:
·
The Company does not currently have an active Chief Financial Officer to oversee the day to day transactions and operations, which ensures the timely and accurate identification and reporting of all necessary transactions.
·
The Company does not have an independent audit committee that can review and approve significant transactions and the reporting process and provide independent oversight of the Company.
·
The Company is dependent on related parties for funding and decision making, which is provided on a very limited basis, therefore accurate accounting, record retention and financial disclosures are not performed in a timely and efficient manner.
·
The Company failed to issue shares approved for issuance as part of the purchase of property, which closed in June 2013.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm as we are a smaller reporting company and not required to provide the report.
Changes in Internal Controls over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
In December 2013 the Company entered into a Joint Venture Agreement with Development Property Holdings, Inc. a California corporation, to enter into and become a Florida joint venture for the purpose of acquiring certain commercial real property in the State of Florida. The Joint Venture will be vested 50% by each partner and all decisions, costs, expenses and profits will be divided evenly between the two partners. To date, the Joint Venture has not executed and closed on any properties and is still searching for its first project.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth the name and age of officers and director as of September 30, 2013. Our Executive Officers are appointed by our Board of Directors and hold their offices until they resign or are removed by the Board. Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws.
Set forth below is a brief description of the background and business experience of our executive officer and director for the past five years.
Matthew Nordgren, age 30, has served as the Chief Executive Officer of Nordco Consulting since he founded it in February 2009. From 2007 to 2010, Mr. Nordgren has been a partner and Vice President of Schlegel Woy Management. Since 2008, Mr. Nordgren has been the Texas President of VEEV, where he is responsible for marketing, distribution, and sales within the State of Texas. Since 2002, Mr. Nordgren has served as an executive at Nordco, Inc., where he is responsible for corporate development and marketing strategies. Mr. Nordgren received his B.A. in government from the University of Texas.
Director Independence and Board Committees
We do not have any independent directors on our board of directors. Our board of directors solely consists of Brendan Powderly, our Chief Executive Officer, who is not independent. Our board of directors does not have any committees, as companies whose securities are traded on the OTC Bulletin Board are not required to have board committees. However, if, at such time in the future, we appoint independent directors on our board we expect to form the appropriate board committees.
We currently do not have a standing audit, nominating or compensation committee. Our board of directors handles functions that would otherwise be handled by each of the committees. We believe that there is not a need for a nominating committee at this time because our board of directors consists of solely one director who is not independent and who is the only decision maker. At such point when we have independent board of directors we will need to establish a nomination committee.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Code of Ethics
We have not adopted a code of ethics that applies to our principal executive officer and principal financial officer. We intend to adopt a Code of Ethics as we develop our business.
Item 11.
Item 11. Executive Compensation.
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us for fiscal year 2013 and fiscal year 2012.
SUMMARY COMPENSATION TABLE
(1)
Matthew Nordgren was appointed as the Chief Executive Officer on February 22, 2013.
(2)
Carlos Salas resigned on February 22, 2013 as the Chief Executive Officer and director of the Company.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Employment Agreements
On September 1, 2013, the Company approved an employment agreement for Matthew Nordgren. Pursuant to the employment agreement, Mr. Nordgren shall be paid $10,000 per month and is eligible for an annual bonus in stock or cash. The term of the employment agreement is for 3-years. A copy of the Employment Agreement is attached hereto as Exhibit 10.1.
Pursuant to the terms of the change of control, Mr. Powderly terminated any employment agreement he had with the Company and waived any rights to any payments due to him under this employment agreement.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of February 25, 2014, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly and the shareholders listed possesses sole voting and investment power with respect to the shares shown.
* denotes ownership of less than 1%.
(1)
Based on 11,125,000 shares of common stock outstanding as of February 25, 2014.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Other than the above, none of the following persons has any direct or indirect material interest in any transaction to which we are a party since our incorporation or in any proposed transaction to which we are proposed to be a party:
(A)
Any of our directors or officers;
(B)
Any proposed nominee for election as our director;
(C)
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our common stock; or
(D)
Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our company.
Director Independence
We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
●
the director is, or at any time during the past three years was, an employee of the company;
●
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
●
a family member of the director is, or at any time during the past three years was, an executive officer of the company;
●
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
●
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
●
the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
Matthew Nordgren is not considered independent because he is an executive officer of the Company.
We do not currently have a separately designated audit, nominating or compensation committee.
Item 14.
Item 14. Principal Accounting Fees and Services.
Audit Fees
For the Company’s fiscal year ended September 30, 2013 and 2012, we have incurred $25,000 and $6,000, respectively, for professional services rendered for the audit and reviews of our financial statements.
All Other Fees (including, Audit Related Fees and Tax Fees)
None.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
●
approved by our audit committee; or
●
entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors.
The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records addressing the percentage of pre-approved audit fees. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
(a) Documents filed as part of this Annual Report
1. Financial Statements
2. Financial Statement Schedules
3. Exhibits
(1)
Referred to and incorporated by reference to the Current Report on Form 8-K filed on June 24, 2013.
In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
Capacity
Date
/s/ Matthew Nordgren
Chief Executive Officer and Chief Financial Officer
March 5, 2014
Matthew Nordgren
(Principal Executive Officer and Principal Financial Officer) and Sole Director