UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, | |
or | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to _______to_______
Commission File Number:333-216047
Kinetic Group Inc.
(Exact Name of Registrant as Specified in its Charter)
Nevada | 47-4685650 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
12001 Research Parkway, Suite 236 Orlando, Florida | 32826 | |
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(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number including area code:(702) 724-2666 (407) 604-1454
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files. Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]☐ No [X]☒
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class | Outstanding | |
Common Stock, $0.001 par value |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | KNIT | None |
KINETIC GROUP INC.
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION | |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk. |
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| PART II - OTHER INFORMATION | |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. |
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| SIGNATURES | 13 |
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2
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KINETIC GROUP INC.
For the Three Months Ended December 31, 20172020 and 20162019
(Unaudited)
(Unaudited)
Index to the Consolidated Financial Statements
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KINETIC GROUP INC.
(Unaudited)
| December 31, 2020 | September 30, 2020 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | - | $ | - | ||||
| Total Assets | $ | - | $ | - | ||||
| LIABILITIES AND STOCKHOLDER’S EQUITY(DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | - | $ | - | ||||
| Total current liabilities | - | - | ||||||
| Total Liabilities | - | - | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Common stock, par value $0.001 per share, 75,000,000 shares authorized; 2,710,200 shares issued and outstanding as of December 31, 2020 and September 30, 2020 | 2,710 | 2,710 | ||||||
| Additional paid-in capital | 174,212 | 174,212 | ||||||
| Accumulated deficit | (176,922 | ) | (176,922 | ) | ||||
| Total stockholders’ equity (deficit) | - | - | ||||||
| Total Liabilities and Stockholder’s Equity (Deficit) | $ | - | $ | - | ||||
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KINETIC GROUP INC. BALANCE SHEETS (Unaudited)
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| December 31, 2017 | September 30, 2017 | ||
ASSETS | |||||
Current Assets: |
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| Cash | $ 10,095 | $ 28,695 | ||
| Accounts receivable | 3,145 | 1,500 | ||
| Prepaid expenses | 8,175 | 175 | ||
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| Total current assets | 21,415 | 30,370 | |
Property and equipment, net | 3,059 | 3,541 | |||
Software, net | 1,455 | 2,079 | |||
Total Assets | $ 25,929 | $ 35,990 | |||
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LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) | |||||
Current Liabilities: |
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| Accounts payable and accrued liabilities | $ 2,337 | $ 7,502 | ||
| Accounts payable - related parties | 28,000 | 25,000 | ||
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| Total current liabilities | 30,337 | 32,502 | |
Total Liabilities | 30,337 | 32,502 | |||
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Commitments and Contingencies |
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Stockholders' Equity (Deficit): |
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| Common stock, par value $0.001 per share, 75,000,000 shares authorized; 4,780,000 shares issued and outstanding as of December 31, 2017 and September 30,2017, respectively | 4,780 | 4,780 | ||
| Additional paid-in capital | 33,495 | 33,495 | ||
| Accumulated deficit | (42,683) | (34,787) | ||
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| Total stockholders' equity (deficit) | (4,408) | 3,488 | |
Total Liabilities and Stockholder's Equity (Deficit) | $ 25,929 | $ 35,990 | |||
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The accompanying notes are an integral part of these consolidated financial statements.
| F-1 |
KINETIC GROUP INC. STATEMENTS OF OPERATIONS (Unaudited) | ||||
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Three Months Ended December 31, 2017 |
Three Months Ended December 31, 2016 | ||
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Revenue | $ 6,200 | $ 7,250 | ||
Cost of revenue | 1,950 | 2,086 | ||
Gross profit | 4,250 | 5,164 | ||
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Operating Expenses: |
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| Compensation – officers | 1,050 | 1,050 | |
| Professional fees | 4,650 | - | |
| General and administrative | 6,446 | 1,444 | |
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| Total operating expenses | 12,146 | 2,494 |
Income (Loss) from Operations | (7,896) | 2,670 | ||
Income tax provision | - | - | ||
Net Income (Loss) | $ (7,896) | $ 2,670 | ||
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Net Income Per Common Share: |
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| Net income per common share - Basic and Diluted | $ 0.00 | $ 0.00 | |
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| Outstanding - Basic and Diluted | 4,780,000 | 2,750,000 | |
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KINETIC GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended (Unaudited) | Three Months Ended (Unaudited) | |||||||
| Revenue | $ | - | $ | - | ||||
| Cost of revenue | - | - | ||||||
| Gross profit | - | - | ||||||
| Operating Expenses: | ||||||||
| Professional fees | - | 31,572 | ||||||
| General and administrative | - | 3,584 | ||||||
| Total operating expenses | - | 35,156 | ||||||
| Income (Loss) from Operations | - | (35,156 | ) | |||||
| Income tax provision | - | - | ||||||
| Net Income (Loss) | $ | - | $ | (35,156 | ) | |||
| Net Loss Per Common Share: | ||||||||
| Net Loss per common share - Basic and Diluted | $ | - | $ | (0.00 | ) | |||
| Outstanding - Basic and Diluted | 2,710,200 | 5,060,000 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
KINETIC GROUP INC. STATEMENTS OF CASH FLOWS (Unaudited)
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| Three Months Ended December 31, 2017 | Three Months Ended December 31, 2016 | ||
Operating Activities: |
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| Net Income (Loss) | $ (7,896) | $ 2,670 | |
| Adjustments to reconcile net income (loss) to net cash providedby operating activities: |
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| Depreciation | 1,106 | 483 |
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| Changes in Operating Assets and Liabilities- |
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| Accounts receivable | (1,645) | - |
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| Prepaid expenses | (8,000) | (175) |
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| Accounts payable and accrued liabilities | (5,165) | 1,222 |
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| Accounts payable - related party | 3,000 | 3,000 |
Net Cash Provided (Used) by Operating Activities | (18,600) | 7,200 | ||
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Investing Activities: |
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Acquisition of property and equipment | - | (5,144) | ||
Net Cash Used in Investing Activities | - | (5,144) | ||
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Financing Activities: |
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| Proceeds from issuance of common stock | - | - | |
Net Cash Provided by Financing Activities | - | - | ||
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Net Change in Cash | (18,600) | 2,056 | ||
Cash - Beginning of Period | 28,695 | 13,425 | ||
Cash - End of Period | $ 10,095 | $ 15,481 | ||
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| Cash paid during the period for: |
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| Interest | $ - | $ - |
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| Income tax paid | $ - | $ - |
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KINETIC GROUP INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
| Common stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Description | Shares | Amount | Capital | Deficit | Total | |||||||||||||||
| Balance – September 30, 2019 | 5,060,000 | $ | 5,060 | $ | 152,040 | $ | (162,103 | ) | $ | (5,003 | ) | |||||||||
| Debt forgiven-related party | 19,822 | 19,822 | ||||||||||||||||||
| Net Income (loss) | - | - | - | (35.156 | ) | (35,156 | ) | |||||||||||||
| Balance – December 31, 2019 (Unaudited) | 5,060,000 | $ | 5,060 | $ | 171,862 | $ | (197,259 | ) | $ | (20,337 | ) | |||||||||
| Balance – September 30, 2020 | 5,060,000 | $ | 2,710 | $ | 174,212 | $ | (176,922 | ) | $ | - | ||||||||||
| Net income (loss) | - | - | - | - | - | |||||||||||||||
| Balance – December 31, 2020 (Unaudited) | 5,060,000 | $ | 2,710 | $ | 174,212 | $ | (176,922 | ) | $ | - | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
KINETIC GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended (Unaudited) | Three Months Ended (Unaudited) | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | - | $ | (35,156 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Changes in Operating Assets and Liabilities- | ||||||||
| Accounts payable and accrued liabilities | - | 3,256 | ||||||
| Accounts payable - related party | - | 31,572 | ||||||
| Clients’ deposits | - | (2,050 | ) | |||||
| Payroll taxes payable | - | - | ||||||
| Net Cash Provided (Used) by Operating Activities | - | (2,378 | ) | |||||
| Investing Activities: | ||||||||
| Acquisition of property and equipment | - | - | ||||||
| Acquisition of software | - | - | ||||||
| Net Cash Used in Investing Activities | - | - | ||||||
| Financing Activities: | ||||||||
| Cash advances-related party | - | 2,403 | ||||||
| Net Cash Provided by Financing Activities | - | 2,403 | ||||||
| Net Change in Cash | - | 25 | ||||||
| Cash - Beginning of Period | - | 19 | ||||||
| Cash - End of Period | $ | - | $ | 44 | ||||
| Cash paid during the period for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income tax paid | $ | - | $ | - | ||||
| Non Cash Financing and Investing Activities: | ||||||||
| Accrued compensation-officer-forgiven and contributed to capital | $ | - | $ | 17,419 | ||||
| Common stock issued for asset | $ | - | $ | 24,000 | ||||
| Common stock cancellation | $ | - | $ | (24,000 | ) | |||
The accompanying notes are an integral part of these consolidated financial statements.
KINETIC GROUP INC.
NOTES TO THE DECEMBER 31, 20172020 AND 20162019 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and Operations
Kinetic Group Inc., a Nevada corporation, (the “Company”) was formed under the laws of the State of Nevada on June 6, 2014. Kinetic Group Inc. is a full service integrated digital marketing agency. The company offers a full range of web services, including web marketing services, social and viral marketing campaigns, search engine optimization consulting, custom web design, website usability consulting and web analytics implementation. The Company generate revenue from sales of its marketing services made directly to small and medium business customers.
On March 23, 2018, the Company formed a wholly owned subsidiary, Kinetic Development Inc., an Ontario, Canada Corporation (“KDI”). The subsidiary was incorporated to facilitate payroll transactions for the employees.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation – Unaudited Interim Financial Information
The accompanying unaudited interimCompany’s financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim.
Principle of consolidation
The accompanying consolidated financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do notstatements include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited interim financial statements should be read in conjunction with the financial statementsaccounts of the Company as of December 31, 2019 and 2018. KDI is included as of December 31, 2019 and 2018 and for the year ended September 30, 2017period from March 23, 2018 (date of formation) through December 31, 2018. All intercompany balances and notes thereto contained in the information as part of the Company’s Annual Report on the Form 10-K filed with Securities and Exchange Commission on December 22, 2017.transactions have been eliminated.
Development Stage company
Kinetic Group Inc. is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing the business. All losses accumulated since Inception (June 4, 2014) have been considered as part of the Company’s development stage activities.
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.
The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.
For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Kinetic Group has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:
| (i) | Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of |
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| (ii) | Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to | |
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| (iii) | Valuation allowance for deferred tax assets:Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors; |
These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.
To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses, approximate their fair value because of the short maturity of those instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm's-lengtharm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-lengtharm’s-length transactions unless such representations can be substantiated.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred.Depreciation is calculated using the straight-line method over the estimated useful lives, which range fromfive (5) years for computer equipment to seven (7) years for office furniture. Upon sale or retirement of office equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include: a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements.
The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned.
The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company derives its revenues from sales contracts with its customer with revenues being generated upon rendering of services. Persuasive evidence of an arrangement is demonstrated via invoice; service is considered provided when the service is delivered to the customers; and the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.
A right of return exists for customers’ retainers that were received prior to commencement of services. If a customer cancels a service contract subsequent to the commencement date, the customer is entitled to a refund, except for services already provided.
Income Tax Provision
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.
Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no unrecognized tax liabilities or benefits in accordance with the provisions of Section 740-10-25 at December 31, 20172019 and 2016.
Earnings per Share2018.
Earnings per Share
Earnings Per Share is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. Earnings per share ("EPS"(“EPS”) is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period.Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied.
Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260–10–55–23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.
There were no potentially debt or equity instruments issued and outstanding at any time during the periods ended December 31, 20172019 and 2016.2018.
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, will have a material effect on the accompanying financial statements.
Note 3 – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying financial statements, the Company had accumulated deficit at December 31, 2017,2019, which raise substantial doubt about the Company’s ability to continue as a going concern.
The Company is attempting to generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations.
Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to continue operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Note 4 – Property and Equipment
Property and equipment at December 31, 20172020 and September 30, 20172020 consisted of the following:
| Estimated Useful Lives (Years) |
| December 31, 2017 |
| September 30, 2017 |
|
|
|
|
|
|
Computer equipment | 5 |
| $ 5,832 |
| $ 5,832 |
Less accumulated depreciation |
|
| (2,773) |
| (2,291) |
Computer equipment, net |
|
| 3,059 |
| 3,541 |
Software | 1 |
| 2,495 |
| 2,495 |
Less accumulated amortization |
|
| (1,040) |
| (416) |
Software, net |
|
| 1,455 |
| 2,079 |
Total property and equipment, net |
|
| $ 4,514 |
| $ 5,620 |
| Estimated Useful Lives (Years) | December 31, 2020 | September 30, 2020 | ||||||||||
| Computer equipment | 5 | $ | 5,832 | $ | 5,832 | |||||||
| Less accumulated depreciation | (5,832 | ) | (5,832 | ) | ||||||||
| Computer equipment, net | - | - | ||||||||||
| Software | 1 | 2,495 | 2,495 | |||||||||
| Less accumulated amortization | (2,495 | ) | (2,495 | ) | ||||||||
| Software, net | - | - | ||||||||||
| Total property and equipment, net | $ | - | $ | - | ||||||||
Depreciation expense
Depreciation expense for the three-monthsthree-month period ended December 31, 20172020 and for the year ended September 30, 20172020 was $1,106$0 and $2,349,$0, respectively.
Note 5 – Asset Acquisition
On November 26, 2019, the Company entered into a warrant assignment and conveyance agreement (the “Warrant Agreement”) with 2672237 Ontario Limited, an Ontario corporation (“Ontario”), pursuant to which the Company agreed to issue one-third of its outstanding shares of common stock to Ontario in exchange for 100% of Ontario’s right, title and interest in, to and under a warrant agreement dated November 26, 2019 between Ontario and Fairway LLC, a limited liability company organized and existing under the laws of the State of Nevada (“Fairway”) that is becoming a wholly-owned subsidiary of the Company by virtue of the transactions contemplated thereby.
On November 26, 2019, the Company also indirectly acquired 100% of the outstanding shares of Solstice Marketing Concepts LLC, a Delaware limited liability company (“Solstice”) by way of contribution of Fairway by Corette LLC, Fairway’s owner (“Corette”), in exchange for Fairway’s 2,349,800 shares of common stock of the Company. Fairway owns 100% of Solstice.
Solstice is the second largest retailer of sunglasses in the United States, carrying a wide range of contemporary and luxury brands with 72 physical stores and an online presence.
On December 4, 2019 the Company issued 24,000,000 shares of common stock to Corette as compensation for its contribution of Solstice to the Company.
On March 24, 2020 the Company and Corette entered into a Rescission Agreement (the “Rescission Agreement”) whereby both parties agreed to rescind all transactions and contributions by each of the parties related to acquisition of Ontario, Fairway and Solstice.
In accordance with the terms of the Rescission Agreement all transactions, contributions and share issuances are each void ab initio and of no force or effect. The parties agreed to restore their respective holdings, positions and relative interests prior to the acquisition transactions, restitutio in integrum.
Note 6 – Note Payable
On November 20, 2019 the Company entered into a $125,000 12% convertible redeemable note due November 20, 2020 (the “Note”). Any amount of principal or interest on the Note, which is not paid when due shall be an event of default and bear interest at the rate of eighteen (18%) per annum from the due date thereof until the same is paid unless the (“Default Interest”) unless the Holder has the option to receive such payment in shares of common stock of the Company by converting such principal amount and accrued, but unpaid, interest into shares of common stock of the Company in accordance with the terms of the Note (provided that no other event of default is outstanding or in effect).
The holder of the Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of the Note then outstanding and/or any accrued, but unpaid, interest into shares of the Company’s common stock at a price (“Conversion Price”) for each share of common stock equal to 70% of the lowest closing price of the common stock as reported on the National Quotations Bureau OTC Market exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the fifteen prior trading days including the day upon which a notice of conversion is received by the Company.
In the case of an Event of Default (as defined in the Note), the Note shall become immediately due and payable and interest shall accrue at the rate of Default Interest.
As of December 31, 2019 the Company did not receive the Note proceeds and did not accrue any interest on the Note principal.
As per Rescission Agreement dated March 24, 2020, Fairway, LLC, an affiliate of Corette assumed in full the Note. In connection with such assumption, the holder of the Note released the Company from any and all obligations arising under the Note.
Note 57 – Related Party Transactions
Consulting services from President, Chief Executive Officer, Secretary and Treasurer, Chief Financial Officer and Chief FinancialLegal Officer
Consulting services provided by the President, Chief Executive Officer, Secretary and Treasurer and Chief Financial OfficerCompany’s officers for the three months ended December 31, 20172020 and the year ended September 30, 20172019 were as follows:
|
| For the Three Months Ended December 31, 2017 |
| For the Year Ended September 30, 2017 |
| |
|
|
|
|
|
|
|
President, Chief Executive Officer | $ | 1,500 |
| $ | 6,000 |
|
Chief Financial Officer, Secretary and Treasurer |
| 1,500 |
|
| 6,000 |
|
| $ | 3,000 | * | $ | 12,000 | * |
| For the Three Months Ended December 31, 2020 | For the Three Months Ended December 31, 2019 | |||||||
| President, Chief Executive Officer | $ | - | $ | - | ||||
| Chief Financial Officer, Secretary and Treasurer | - | - | ||||||
| $ | - | $ | - | |||||
* - During the three-month period ended December 31, 2017, $1,950 of these related parties consulting services was recognized in cost of revenues and $1,050 in officers’ compensation within operating expenses. During the year ended September 30, 2017, $7,350 of these related parties consulting services was recognized in cost of revenues and $4,650 in officers’ compensation within operating expenses.Debt Settlement
Accounts Payable – Related PartiesAs of March 31, 2018 the Company owed to the Company’s officers, Mr. Yaroslav Startsev and Mr. Nikolai Kuzmin, $31,000 (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its officers. The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective March 31, 2018.
As of September 28, 2018 the Company owed to the Company’s former President, Mr. Timothy Barker, $26,451.61 (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its President. The Company’s former President agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective September 28, 2018.
As of September 6, 2019 the Company owed to the Company’s officers, Mr. Yaroslav Startsev and Mr. Nikolai Kuzmin, $53,023 (the “Debt”) for cash advances of $35,798 and management consulting fees of $17,225 incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its officers. The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective September 6, 2019.
As of December 31, 2017 and September 30, 20172019 the Company owed its directorsto the Company’s officers, Mr. Nathan Rosenberg and officers $28,000Mr. Mark Radom, $19,822 (the “Debt”) for cash advances of $2,403 and $25,000 respectively. These amounts represent unpaidprofessional consulting fees asof $17,419 incurred by the Company in accordance with the effective Service Agreement between the Company and its Chief Legal Officer. The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the end of the reporting period.Debt, effective December 31, 2019.
These Debt settlements improved the Company’s financial position and increased its working capital. The Company’s current and former officers released and forever discharged the Company, its successors and assigns from all manner of actions, suits, debts due, accounts, bonds, contracts, claims and demands whatsoever which against the Company they ever had or now have in connection to the Debt.
Note 68 – Stockholders’ Equity (Deficit)
Shares authorized
Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par value $0.001 per share.
CommonUnregistered shares of common stock
In August 2015, the Company sold 2,750,000 shares of its common stock at par to its directors for $2,750 in cash.
On March 27, 2018 the Board of Directors of the Company approved the Stock Cancellation Agreements with Yaroslav Startsev (1,500,000 shares) and Nikolai Kuzmin (1,250,000 shares) canceling their shares with the Company in exchange for the Company agreeing to accept new subscription agreements. The Company retained the subscription funds paid by Yaroslav Startsev and Nikolai Kuzmin for the cancelled shares of Common Stock as contributed capital to the Company.
As of March 28, 2018, the Company received subscription agreements and subscription funds representing an aggregate of 1,300,000 shares of Common Stock from Yaroslav Startsev for $1,300 and 1,050,000 shares of Common stock from Nikolai Kuzmin for $1,050 which certificates shall bear an appropriate restricted legend under the Securities Act of 1933, as amended.
As of March 28, 2018 the Company also received a subscription agreement and subscription funds from Timothy Barker, former President of the Company, representing 400,000 shares of Common Stock for $400 which shall bear an appropriate restricted legend under the Securities Act of 1933 as amended.
The above transactions were undertaken to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company. The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.
The following table represents a summary of the restricted stock cancellation and issuance during the year ended September 30, 2018:
| Balance | Balance | |||||||||||||||||
| Name and Title of | September | Number of Shares | September | |||||||||||||||
| Title of Class | Beneficial Owner | 30, 2017 | Canceled | Issued | 30, 2018 | |||||||||||||
| Common | T.Barker, former President | - | 400,000 | 400,000 | ||||||||||||||
| Common | Y.Startsev, President, C.E.O. | 1,500,000 | (1,500,000 | ) | 1,300,000 | 1,300,000 | ||||||||||||
| Common | N.Kuzmin, C.F.O. | 1,250,000 | (1,250,000 | ) | 1,050,000 | 1,050,000 | ||||||||||||
| Total Number of Shares: | 2,750,000 | (2,750,000 | ) | 2,750,000 | 2,750,000 | |||||||||||||
In September 2018 the Company issued 100,000 restricted shares of common stock at a price of $0.02 per share for consulting services related to business development provided by a third party.
On December 4, 2019 the Company issued 24,000,000 restricted shares of common stock to Corette LLC as compensation for its contribution of Solstice to the Company. These shares were cancelled as per Rescission Agreement between the Company and Corette.
Registered shares of common stock
During the year ended September 30, 2017, the Company’s Registration Statement on the Form S-1 filed with the Securities and Exchange Commission was declared effective. In April 2017, the Company completed the sale of 2,030,000 shares of common stock at $0.0175 per share for total proceeds of $35,525 pursuant to this Registration Statement.
| F-14 |
Regulation D Offering
On April 9, 2018 the Company filed with the Securities and Exchange Commission a notice of an exempt offering of the Company’s securities on the Form D (the “Offering”). The Company is offering 10,000,000 Shares under the Offering at a price of $0.02 per Share for an aggregate Offering price of US $200,000. The Securities are being offered by the Company through its officers and directors on a “best efforts” basis, pursuant to a non-public offering exemption from the registration requirements imposed by the Securities Act of 1933, under Regulation D, Rule 506, as amended (“1933 Act”). The Securities are not being registered and may not be sold unless they are registered under applicable Federal and State securities laws or an exemption from such laws is available.
This Offering was closed on August 21, 2018. The Company sold 180,000 shares of common stock for total proceeds of $3,600 pursuant to this Offering.
Note 79 – Subsequent Events
In accordance with ASC 855-10 we have analyzed our operations subsequent to December 31, 20172019 to February 8, 2018, theSeptember 28, 2021, date of these financial statement were issued, and have determined that we do not have any material subsequent events to disclose in these financial statements other than the events discussed above.statements.
F-11
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements and Associated Risks.
The following discussion should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Quarterly Report on Form 10-Q.
Our Business
Kinetic Group Inc., a Nevada corporation, was formed under the laws of the State of Nevada on June 6, 2014. Kinetic Group is a full service integrated digital marketing agency. The company offers a range of web services, including web marketing services, social media services, search engine management, custom web design and development,including social media and content management solutions.solutions. We build digital strategies that help our clients to have fruitful dialogues with their audiences, whether targeted or non-targeted.We provide consulting on a wide variety of issues, from selection of domain name registrars and hosting providers, to the most cost-efficient and effective marketing strategies.
On March 23, 2018, the Company formed a wholly owned subsidiary, Kinetic Development Inc., an Ontario, Canada Corporation (“KDI”). The subsidiary was incorporated to facilitate payroll transactions for the employees. The accompanying consolidated financial statements include all of the accounts of the Company as of September 30, 2018 and 2017. KDI is included as of June 30, 2019 and 2018 and for the period from March 23, 2018 (date of formation) through September 30, 2018. All intercompany balances and transactions have been eliminated.
Kinetic Group Inc. is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing the business. All losses accumulated since Inception (June 6, 2014) have been considered as part of the Company’s development stage activities.
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.
The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.
For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Kinetic Group has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.
| 4 |
Our Digital Marketing Services
We offer a wide variety of integrated digital marketing services to our clients. Our services include web design and development, organic search engine optimization (Organic SEO), pay-per-click (PPC) management, content creation and marketing, e-mail marketing and social media marketing.
Web Design and Development.
We offer custom website design services,whether it is front-end design, or a full end-to-end web development project. Our management, as well as our freelance website design team, is composed of experienced web design and creation professionals and graphic designers who create customized websites tailored to the needs and goals of our customers. We engage, when necessary, additional designers and developers for each individual project as an addition to our management team.
Organic Search Engine Optimization (Organic SEO).
Search results for websites that use organic SEO will grow, expand, and adapt over time in response to readers'readers’ desires. Although black hat SEO methods, such ashiddenas hidden text, cloaking, and blog comment spam,may boost a website’s search engine page rank in the short term, these methods could also get the site banned from the search engines altogether.
Organic SEO can be achieved by:
optimizing the web page with relevant content,spreading links pointing to the web site’s content, andincorporating metatags and other types of tag attributes.
| ● | optimizing the web page with relevant content, |
| ● | spreading links pointing to the web site’s content, and |
| ● | incorporating metatags and other types of tag attributes. |
Organic SEO methods mainly rely on the relevancy of the content they offer. Some of the benefits of organic SEO include:
generating more clicks as the organically optimized sites offer relevant content related to the keywords searched for,building greater trust among the site’s users, andbeing cost-effective when compared to paid listings.
| ● | generating more clicks as the organically optimized sites offer relevant content related to the keywords searched for, |
| ● | building greater trust among the site’s users, and |
| ● | being cost-effective when compared to paid listings. |
Pay-Per-Click (PPC) management.
Pay-per-click (PPC), also known as cost-per-click (CPC), is an internet advertising model used to direct traffic to websites, in which an advertiser pays a publisher (typically a website owner or a network of websites) whenever the ad is clicked on.Search engines, such as Google and Bing, allow businesses and individuals to buy listings in their search results. These listings appear above the non-paid organic search results. The search engine is then paid every time a user clicks on the sponsored listing.
Pay-per-click advertising can generate traffic right away. It is a simple strategy: spend enough on PPC advertisement and get top placement when people execute relevant searches. Potential customers will see the business first when executing a relevant search as it will appear at the top of the search results page. However, PPC advertising can run up costs extremely quickly. It is easy to get caught up in a bidding war over a particular keyword and end up spending far more than your potential return. ‘Ego-based’ bidding, where a business or a marketing agency decides they must be at the top of the results may cause the client to spend too much money. Another concern with PPC is that there is constant bid inflation, which raises the per-click cost for highly-searched phrases.
| 5 |
If a client has a short-term campaign for a new product, service, or special issue, pay-per-click can be a great way to generate buzz quickly. We can start a pay-per-click campaign within 24-48 hours, and the client can generally change the text of the advertisement at any time, allowing the client to adjust the advertisement’s message easily. If the client needs to bring potential customer attention to a new product or service for a finite amount of time, PPC is one effective way to achieve this goal.
Social Media and Blogs
We help our clients build their customer base by helping them cultivate a strong online presence. Corporate blogs allow brands to engage with existing and potential customers, to improve their search engine rankings and to create a community of posters through the comments section. Currently, our directors provide blog design services. In addition, when a short-term project requires a specific set of skills, we engage freelance designers through online talent recruitment tools, such as www.upwork.com and LinkedIn. We also use freelance researchers, bloggers, and writers to research relevant news and information about our clients, industries and businesses. Our freelance writers create blog posts, tweets, and news comments that are posted on relevant social media and news websites. We customize the design, content and message to appeal to the target audience for our clients’ brand. Our social media services include:
-Social Media Strategy
-Social Media Campaigns
-Blogging
-Visual Social Media Posts/Campaigns
-Strategic Monitoring
-Reporting and Analysis
| - | Social Media Strategy | |
| - | Social Media Campaigns | |
| - | Blogging | |
| - | Visual Social Media Posts/Campaigns | |
| - | Strategic Monitoring | |
| - | Reporting and Analysis |
Currently, we have limited workforce and financial resources and are not able to take on labor-intensive projects. As a result, we cannot guarantee that we will be successful in our efforts to attract new customers and expand our operations. Failure to achieve a sustainable sales level will cause us to go out of business.
Results of operations for the three-month periods ended December 31, 20172020 and 2016.2019.
Revenue
Our gross revenue from consulting services related to website development, SEO consulting and online marketing services for the three-month periods ended December 31, 20172020 and 20162019 was $6,200$0 and $7,250$0 respectively. Our cost of revenues for the three-month period ended December 31, 20172020 and 2019 was $1,950 (December 31, 2016: $2,086) resulting in a gross profit of $4,250 (December 31, 2016: $5,164).$0 and $0 respectively.
Costs and Expenses
The major components of our expenses for the three- monththree-month periods ended December 31, 20172020 and 20162019 are outlined in the table below:
| For the Three Months | For the Three Months | ||||||||||||||||
| Ended | Ended | Increase | |||||||||||||||
| For the Three Months Ended December 31, 2017 |
|
For the Three Months Ended December 31, 2016 |
| Increase (Decrease) | December 31, 2020 | December 31, 2019 | (Decrease) | |||||||||
|
|
|
|
|
| ||||||||||||
Compensation - officers | $ 1,050 |
| $ 1,050 |
| $ - | $ | - | $ | - | $ | - | ||||||
Professional fees | 4,650 |
| - |
| 4,650 | - | 31,572 | (31,572 | ) | ||||||||
General and administrative | 6,446 |
| 1,444 |
| 5,002 | - | 3,584 | (3,584 | ) | ||||||||
| $ 12,146 |
| $ 2,494 |
| $ 9,652 | $ | - | $ | 35,156 | $ | (35,156 | ) | |||||
The increasedecrease in our operating costs for the three months ended December 31, 2017,2020, compared to the same period in our fiscal 2017,2019, was mainly due to an increase in our corporate activities and an increase in expenses related to implementation of our business plan.no activity.
| 6 |
General and administrative expenses of $6,446 incurred during the three months ended December 31, 2017 consisted of filing fees of $1,120 (December 31, 2016: $0), accounting fees of $2,500 (December 31, 2016: $0), depreciation expense of $1,106 (December 31, 2016: $483), office expenses of $206 (December 31, 2016: $284), office rent of $375 (December 31, 2016: $131), travel expenses of $737 (December 31, 2016: $520), transfer agent fees of $297 (December 31, 2016: $0) and bank charges of $105 (December 31, 2016: $26).
The president of the Company provides management consulting services to the Company. On September 1, 2015, we have entered into consulting agreements with Yaroslav Startsev, our president, and Nikolai Kuzmin, our chief financial officer. These agreements had a three year term with an option to terminate these agreements by mutual written consent of all parties to the agreements with a sixty (60) days advance written notice. During the three-month periods ended December 31, 2017 and 2016 the Company incurred $3,000 in total in management consulting services with the president of the Company and the chief financial officer.
A portion of consulting services for the three-month period ended December 31, 2017 directly related to sales provided by the president and chief financial officer of the Company of $1,950 (December 31, 2016: $1,950) was recognized in cost of revenues and $1,050 (December 31, 2016: $1,050) in officer’s compensation within operating expenses.
Accounts Payable – Related PartiesDebt Settlement
As of DecemberMarch 31, 2017 and September 30, 20172018 the Company owed its directorsto the Company’s officers, Mr. Yaroslav Startsev and officers $28,000 and $25,000 respectively. These amounts represent unpaidMr. Nikolai Kuzmin, Thirty One Thousand Dollars ($31,000) (the “Debt”) for management consulting fees asincurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its officers. The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the endDebt, effective March 31, 2018.
As of September 28, 2018 the Company owed to the Company’s former President, Mr. Timothy Barker, Twenty Six Thousand Four Hundred Fifty One Dollar and 61 Cents ($26,451.61) (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its President. The Company’s former President agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the reporting period.Debt, effective September 28, 2018.
These Debt settlements improved the Company’s financial position and increased its working capital. The Company’s current and former officers released and forever discharged the Company, its successors and assigns from all manner of actions, suits, debts due, accounts, bonds, contracts, claims and demands whatsoever which against the Company they ever had or now have in connection to the Debt.
| 7 |
Liquidity and Capital Resources
|
| As of |
| As of | As of | As of | ||||||
|
| December 31, |
| September 30, | December 31, | September 30, | ||||||
|
| 2017 |
| 2017 | 2020 | 2020 | ||||||
|
|
|
|
| ||||||||
Total current assets | $ | 21,415 | $ | 30,370 | $ | - | $ | - | ||||
Total current liabilities |
| (30,337) |
| (32,502) | - | - | ||||||
Working capital (deficiency) | $ | (8,922) | $ | (2,132) | $ | - | $ | - | ||||
Liquidity
Our internal liquidity is provided by our operations.Duringoperations. During the three-monthsthree-month periods ended December 31, 20172020 and 20162019 the Company reported net income (loss)loss from operations of $(7,896)$0 and $2,670,$35.156, respectively.
To date we have financed our operations by cash generated from sales of our services and shares of our common stock. We were able to sustain our operations by increasing the number of our clients. Since inception,
In August 2015, we have sold 2,750,000 shares of common stock at $0.001 per share to our directors for total proceeds of $2,750. During the six months ended March 31, 2018 the Company’s Board of Directors has appointed new President of the Company. The Company has cancelled the restricted shares of common stock issued to the company’s two directors in 2015 as per Share Cancellation Agreements and issued new 2,750,000 restricted shares of common stock to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company. The Company has received $2,750 from the officer and directors of the Company for the restricted stock issued in March of 2018 and recorded $2,750 received from the Company’s directors in 2015 as contributed capital.
The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.
During the year ended September 30, 2017, the Company’s Registration Statement on the Form S-1 filed with the Securities and Exchange Commission was declared effective. In April 2017, the Company completed the sale of 2,030,000 shares of common stock at $0.0175 per share for total proceeds of $35,525 pursuant to this Registration Statement.
On April 9, 2018 the Company filed with the Securities and Exchange Commission a notice of an exempt offering of the Company’s securities on the Form D (the “Offering”). The Company is offering 10,000,000 Shares under the Offering at a price of $0.02 per Share for an aggregate Offering price of US $200,000. The Securities are being offered by the Company through its officers and directors on a “best efforts” basis, pursuant to a non-public offering exemption from the registration requirements imposed by the Securities Act of 1933, under Regulation D, Rule 506, as amended (“1933 Act”). The Securities are not being registered and may not be sold unless they are registered under applicable Federal and State securities laws or an exemption from such laws is available.
This Offering was closed on August 21, 2018. The Company sold 180,000 shares of common stock for total proceeds of $3,600 pursuant to this Offering.
If we are not successful in expanding our client base, maintaining profitability and positive cash flows, additional capital may be required to maintain ongoing operations. We have explored, and are continuing to explore, options to provide additional financing to fund future operations, as well as other possible courses of action. Such actions include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders), loans and cash advances from our directors or other third parties, and other similar actions.
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There can be no assurance that we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, our directors, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.
Cash Flows
The table below, for the period indicated, provides selected cash flow information:
| For the Three | For the Three | |||||||||||
| Months | Months | |||||||||||
| Ended | Ended | |||||||||||
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| For the Three Months Ended December 31, 2017 |
| For the Three Months Ended December 31, 2016 | December 31, 2020 | December 31, 2019 | ||||||
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Net cash provided (used) by operating activities | $ | (18,600) | $ | 7,200 | $ | - | $ | (2,378 | ) | |||
Cash used in investing activities |
| - |
| (5,144) | - | - | ||||||
Cash provided by financing activities |
| - |
| - | - | 2,403 | ||||||
Net increase in cash | $ | (18,600) | $ | 2,056 | ||||||||
| Net change in cash | $ | - | $ | 25 | ||||||||
We have generated revenues of $6,200$0 and $7,250$0 during the three-month periods ended December 31, 20172020 and 2016,2019, respectively. We had no other sources of cash inflow during the reporting periods.
Cash Flows from Operating Activities
Our cash provided (used) by operating activities as of December 31, 2017 of $(18,600) (December 31, 2016: $7,200) is a net result of cash generated from sales of our marketing, SEO consulting and web development services, and changes in our current assets and liabilities.
This portion of our cash flow represents the most significant, in addition to the offering proceeds, source of funding for our operations during the three-month period ended December 31, 2017. The major uses of our operating cash include funding general operating expenses (professional fees, consulting, travel, office expenses and office rent) and cost of revenues.
Cash flows resulting from changes in assets and liabilities for the three-month period ended December 31, 2017, include an increase in accounts receivable of $1,645, an increase in prepaid expenses of $8,000, an increase in the officers’ accrued compensation of $3,000 and a decrease in accounts payable and accrued liabilities of $5,156. The increase in accounts receivable was due to the unpaid fees for web development and SEO consulting outstanding as of December 31, 2017. The increase in prepaid expenses was due to a retainer for professional services paid by the company during the period. The decrease in accounts payable is a net result of operating expenses incurred during the quarter and payments made by the company to its vendors during the same period. The increase in the officers’ accrued compensation is due to the consulting fees incurred by the Company during the three-month period ended December 31, 2017 that remained unpaid as at the end of this period.
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Cash flows resulting from changes in assets and liabilities for the three-month period ended December 31, 2016, include an increase in the officers’ accrued compensation of $3,000, an increase in prepaid expenses of $175 and in accounts payable and accrued liabilities of $1,222. The increase in prepaid expenses was due to a security deposit for office rent.
Cash Flows from Investing Activities
We did not generate any cash from investing activities during the three-month periods ended December 31, 2017 and 2016.During the three-month period ended December 31, 2016 we used a portion of our cash of $5,144 provided by operating activities for purchasing computer and office equipment.
Property and equipment at December 31, 2017 and September 30, 2017 consisted of the following:
| Estimated Useful Lives (Years) |
| December 31, 2017 |
| September 30, 2017 |
|
|
|
|
|
|
Computer equipment | 5 |
| $ 5,832 |
| $ 5,832 |
Less accumulated depreciation |
|
| (2,773) |
| (2,291) |
Computer equipment, net |
|
| 3,059 |
| 3,541 |
Software | 1 |
| 2,495 |
| 2,495 |
Less accumulated amortization |
|
| (1,040) |
| (416) |
Software, net |
|
| 1,455 |
| 2,079 |
Total property and equipment, net |
|
| $ 4,514 |
| $ 5,620 |
Cash Flows from Financing Activities
We did not generate any cash from financing activities during the three-month periods ended December 31, 2017 and 2016.
Recent Accounting Pronouncements
See Note 2 to the Unaudited Financial Statements.
Off Balance Sheet Arrangements
As of December 31, 2017,2020 we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.
Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date. We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken.
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We were not subject to any legal proceedings during the three-month periods ended December 31, 20172019 and 2016,2018, andcurrently we are not involved in any pending litigation or legal proceeding.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.In August 2015, we sold 2,750,000 shares of common stock at $0.001 per share to our directors for total proceeds of $2,750. During the nine months ended June 30, 2018 the Company’s Board of Directors has appointed new President of the Company. The Company has cancelled the restricted shares of common stock issued to the company’s two directors in 2015 as per Share Cancellation Agreements and issued new 2,750,000 restricted shares of common stock to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company.
The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.
The Company has received $2,750 from the officer and directors of the Company for the restricted stock issued in March of 2018 and recorded $2,750 received from the Company’s directors in 2015 as contributed capital.
On April 9, 2018 the Company filed with the Securities and Exchange Commission a notice of an exempt offering of the Company’s securities on the Form D (the “Offering”). The Company was offering 10,000,000 Shares under the Offering at a price of $0.02 per Share for an aggregate Offering price of US $200,000. As of June 30, 2018 the Company sold 180,000 shares of common stock for total proceeds of $3,600 pursuant to this Offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
No senior securities were issued and outstanding during the three-month periods ended December 31, 20172019 and 2016.2018.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable to our Company.
None.
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The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:
EXHIBIT
NUMBER DESCRIPTION
NUMBER | DESCRIPTION | |
| 3.1 | Articles of Incorporation. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017. | |
3.2 | ||
4.2 | ||
10.1 | ||
10.2 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document ** | |
101.SCH | XBRL Taxonomy Extension Schema Document ** | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document ** | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document ** | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document ** | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document ** |
* Filed herewith.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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Pursuant to the requirements of 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.
Date: February 9, 2018September 27, 2021
KINETIC GROUP INC. | ||||
By: | /s/ | |||
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In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of Kinetic Group Inc. and in the capacities and on the dates indicated.
SIGNATURES | TITLE | DATE | ||
/s/ | President, C.E.O. and Director |
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