UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TOUNDER SECTION 13 OR 15(d) OF THE
For the quarterly period ended:ended September 30, 2009
[ ] TRANSITION REPORT PURSUANT TOUNDER SECTION 13 OR 15(d) OF THE
For the transition period from ___________ to _____________
Commission File Number: 333-39629
KID CASTLE EDUCATIONAL CORPORATION
(Exact name of Registrantregistrant as specified in its charter)
Delaware | 59-2549529 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) |
370 Amapola Ave., Suite 200A, Torrance California | 90501 | |
(Address of principal executive offices) | (Zip Code) |
310-895-1839
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the precedingpast 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o[X] No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for 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 or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and, “smaller reporting company”, and “emerging growth company”, in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company | |
(Do not check if smaller reporting company) | Emerging growth company [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
x
EXPLANATORY NOTE:
TABLE OF CONTENTS
PART I. – FINANCIAL INFORMATION | |||
Item 1. | 1 | ||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 23 | ||
Item 4. Controls and Procedures | 23 | ||
PART II. – OTHER INFORMATION | |||
Item 1. Legal Proceedings | 24 | ||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 25 | ||
Item 3. Defaults Upon Senior Securities | 25 | ||
Item 4. Mine Safety Disclosures | 25 | ||
Item 5. Other Information | 25 | ||
Item 6. Exhibits | 26 | ||
Signatures | 28 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, | 2 | ||
Condensed Consolidated Statements of Operations for the | 3 | ||
Condensed Consolidated Statements of | 4 | ||
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, | 4 | ||
Notes to | |||
5 | |||
KID CASTLE EDUCATIONAL CORPORATION | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
| As of |
|
|
|
| |
| September 30, 2020 |
| December 31, |
| ||
| (unaudited) |
| 2019 (audited) |
| ||
ASSETS |
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents | $ | 5,341 |
| $ | 10,878 |
|
Inventory Asset |
| 22,961 |
|
| 8,620 |
|
Other Current Asset |
| 186 |
|
| 41,579 |
|
Real Estate Investments |
| 970,148 |
|
| - |
|
Total Current Assets |
| 998,635 |
|
| 61,077 |
|
Fixed Assets |
|
|
|
|
|
|
Fixed assets, net | $ | 13,249 |
| $ | 17,550 |
|
Total Fixed Assets |
| 13,249 |
|
| 17,550 |
|
TOTAL ASSETS | $ | 1,011,885 |
| $ | 78,628 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Accrued expenses |
| 2,508 |
|
| 800 |
|
Current portion, notes payable |
| 5,524 |
|
|
|
|
Total Current Liabilities | $ | 8,032 |
| $ | 800 |
|
|
|
|
|
|
|
|
Long-Term Liabilities: |
|
|
|
|
|
|
Notes payable | $ | 150,000 |
| $ | - |
|
Notes payable - related party |
| 930,350 |
|
| 41,559 |
|
Total Long-Term Liabilities |
| 1,080,350 |
|
| 41,559 |
|
Total Liabilities | $ | 1,088,382 |
| $ | 42,359 |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
Preferred stock, $.00001 par value, 1,000,000 shares authorized, 100,000 and I,000,000 issued and outstanding as at December 31, 2019 and September 30, 2020 respectively. | $ | 13 |
| $ | 10 |
|
|
|
|
|
|
|
|
Common Stock, $0.00001 par value, 1,000,000,000 shares authorized, 922,324,706 issued and outstanding as at December 31, 2019 and September 30, 2020 respectively |
| 11,196 |
|
| 11,196 |
|
Additional paid in capital |
| 7,851,805 |
|
| 7,826,113 |
|
Accumulated deficit |
| (7,939,509) |
|
| (7,801,050) |
|
Total Kid Castle Stockholders’ equity |
| (67,316) |
|
|
|
|
Non-controlling shareholders |
| (9,181) |
|
|
|
|
Total Stockholders’ Equity (Deficit) | $ | (76,497) |
| $ | 36,269 |
|
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 1,011,885 |
| $ | 78,628 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements
KID CASTLE EDUCATIONAL CORPORATION | ||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
(unaudited) | ||||||||||||||
Nine Months Ended September 30 | Three Months Ended September 30 | |||||||||||||
2020 |
| 2019 | 2020 | 2019 | ||||||||||
|
|
| ||||||||||||
Net gain from sales of investments under trading securities | $ | 99,877 | $ | - | $ | 19,035 | $ | - | ||||||
Sales - Investment property |
|
| 1,205,000 |
| - |
| - |
| - | |||||
Total Revenue |
|
| 1,304,877 |
| - |
| 19,035 |
| - | |||||
|
|
|
|
|
|
|
|
|
| |||||
Cost of Investment Properties Sold |
| 1,179,827 |
| - |
| - |
| - | ||||||
Gross Profit |
|
| 125,050 |
| - |
| 19,035 |
| - | |||||
|
|
|
|
|
|
|
|
|
| |||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative |
|
| 42,923 |
| 52,328 |
| 8,095 |
| 16,356 | |||||
Marketing and advertising | 16,325 |
| 24,023 |
| 1,598 |
| 10,499 | |||||||
Amortization and depreciation |
| 4,301 |
| - |
| 1,434 |
| - | ||||||
Professional fees |
|
| 66,059 |
| 8,756 |
| 11,221 |
| 3,971 | |||||
Total Expenses |
|
| 129,608 |
| 85,107 |
| 22,347 |
| 30,825 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| |||||
INCOME FROM OPERATIONS |
| (4,559) |
| (85,107) |
| (3,312) |
| (30,825) | ||||||
|
|
|
|
|
|
|
|
|
| |||||
OTHER INCOME |
|
|
|
|
|
|
|
|
| |||||
Interest expense, net |
|
| - |
| - |
| - |
| - | |||||
Dividends |
|
| 173 |
| - |
| 152 |
| - | |||||
Unrealized gain (loss) |
|
| (128,233) |
| - |
| (39,515) |
| - | |||||
|
|
|
|
|
|
|
|
|
| |||||
INCOME (LOSS) BEFORE TAXES |
|
| (132,618) |
| (85,107) |
| (42,676) |
| (30,825) | |||||
INCOME TAX PROVISION |
|
|
|
|
|
|
|
|
| |||||
NET INCOME (LOSS) |
| $ | (132,618) | $ | (85,107) | $ | (42,676) | $ | (30,825) | |||||
|
|
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|
|
|
|
|
| |||||
Earnings (loss) per Share: Basic and Diluted |
| $ | (0.000142) | $ | (0.000092) | $ | (0.000046) | $ | (0.000033) | |||||
|
|
|
|
|
|
|
|
|
| |||||
Weighted Average Common Shares Outstanding: Basic and Diluted |
|
| 922,324,706 |
| 922,324,706 |
| 922,324,706 |
| 922,324,706 | |||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
KID CASTLE EDUCATIONAL CORPORATION | ||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT | ||||||||||
Additional | ||||||||||
Common | Paid-In | Accumulated | ||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Total | |
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
| 25,000,000 | $ | 8,592,138 | $ | 259,341 | $ | (7,638,660) | $ | 1,212,819 |
Reverse Split in 2009 |
| (22,675,294) |
| (8,590,445) |
| 7,386,026 |
| (12,708) |
| (1,217,127) |
Balance at December 31, 2018 |
| 2,324,706 | $ | 1,693 | $ | 7,645,367 | $ | (7,651,368) | $ | (4,308) |
Issuance of common stock to settle debt |
| 10,000,000 |
| 100 |
|
|
|
|
| 100 |
Issuance of common stock for preferred shares conversion |
| 900,000,000 |
| 9,000 |
|
|
|
|
| 9,000 |
Issuance of common stock for employee compensation |
| 10,000,000 |
| 100 |
|
|
|
|
| 100 |
Effect of Acquisition of CBDX |
|
|
| 313 |
| 180,746 |
|
|
| 181,059 |
Net loss for the period |
|
|
|
|
|
|
| (149,682) |
| (149,682) |
Balance, December 31, 2019 |
| 922,324,706 | $ | 11,196 | $ | 7,826,113 | $ | (7,801,050) | $ | 36,268 |
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock |
|
|
|
|
| 19,853 |
|
|
| 19,853 |
Net loss for the period |
|
|
|
|
|
|
| (132,618) |
| (112,765) |
Balance, September 30, 2020 |
| 922,324,706 | $ | 11,196 | $ | 7,845,966 | $ | (7,939,509) | $ | (76,497) |
Additional | ||||||||||
Common | Paid-In | Accumulated | ||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Total | |
Balances – July 1, 2020 |
| 922,324,706 |
| 11,196 |
| 7,845,966 |
| (7,874,954) |
| (32,380) |
Net loss for the period |
|
|
|
|
|
|
| (42,676) |
| (42,676) |
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020 |
| 922,324,706 | $ | 11,196 | $ | 7,845,966 | $ | (7,939,509) | $ | (76,497) |
The accompanying notes are an integral part of these unaudited consolidated financial statements
KID CASTLE EDUCATIONAL CORPORATION | ||||||||
STATEMENTS OF CASHFLOWS | ||||||||
(unaudited) | ||||||||
Nine Months Ended September 30 | ||||||||
2020 | 2019 | |||||||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
| |
Net Income (Loss) |
| $ | (132,618) |
| $ | (85,107) |
| |
Adjustments to reconcile net income (loss) to |
|
|
|
|
|
|
| |
net cash used in operating activities: |
|
|
|
|
|
|
| |
Inventory Asset: Trading Securities |
|
| 22,435 |
|
| - |
| |
Accrued expenses |
|
| 1,522 |
|
| (589) |
| |
Depreciation |
|
| 4,301 |
|
| - |
| |
Net cash provided by (used in) operating activities |
|
| (104,360) |
|
| (85,696) |
| |
|
|
|
|
|
|
|
| |
Net Cash Flows from Investing Activities: |
|
|
|
|
|
|
| |
Payment for real estate investment |
|
| (439,409) |
|
| - |
| |
Receipt from sales of real estate investment |
|
| 922,159 |
|
| - |
| |
Receipt from sales of other investment |
|
| 41,579 |
|
| (19,828) |
| |
Net cash provided by (used in) investing activities |
|
| 524,328 |
|
| (19,828) |
| |
|
|
|
|
|
|
|
| |
Net Cash Flows from Financing Activities |
|
|
|
|
|
|
| |
Borrowing from brokerage loan - margin loan |
|
| 1,208 |
|
| - |
| |
Proceeds from LOC - short term - related party |
|
| 122,431 |
|
| (14,175) |
| |
Payment on line of credit - longt term - related party |
|
| (726,192) |
|
| (15,899) |
| |
Proceeds from issuance of line of credit - longt term |
|
| 150,000 |
|
| 28,656 |
| |
Proceeds from issuance of stock |
|
| 25,697 |
|
| 110,332 |
| |
Net cash provided by (used in) financing activities |
|
| (426,856) |
|
| 108,913 |
| |
|
|
|
|
|
|
|
| |
Net increase (decrease) in cash: |
|
| (6,888) |
|
| 3,389 |
| |
Cash at the beginning of the period: |
|
| 12,229 |
|
| 1,393 |
| |
Cash at the end of the period: |
| $ | 5,341 |
| $ | 4,782 |
| |
|
|
|
|
|
|
|
| |
Supplemental disclosures of cash flow information Cash paid during the period for: |
|
|
|
|
|
|
| |
Cash paid for interest |
| $ | 115.49 |
| $ | - |
| |
Cash paid for tax |
| $ | - |
| $ | - |
| |
|
|
|
|
|
|
|
| |
The accompanying notes are an integral part of these unaudited consolidated financial statements
NOTE 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nature of Business
The Company and Nature of Business
Kid Castle Educational Corporation,
(Unaudited) September 30, 2009 | December 31, 2008 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and bank balances | $ | 2,423,266 | $ | 1,985,818 | ||||
| Bank fixed deposits - pledged (Note 12) | 10,262 | 2,847 | ||||||
| Notes and accounts receivable, net (Note 5) | 3,175,407 | 2,171,768 | ||||||
| Inventories, net (Note 6) | 1,556,527 | 1,933,153 | ||||||
| Other receivables (Note 7) | 340,515 | 396,003 | ||||||
| Prepayments and other current assets (Note 8) | 871,633 | 475,617 | ||||||
| Pledged notes receivable (Note 12) | 428,189 | 416,238 | ||||||
| Deferred income tax assets | 54,882 | 45,617 | ||||||
| Total current assets | 8,860,681 | 7,427,061 | ||||||
| Deferred income tax assets | 49,921 | 49,528 | ||||||
| Prepayment of long-term investments (Note 9) | 1,717,149 | - | ||||||
| Long-term investments (Note 10) | 100,087 | 68,336 | ||||||
| Property and equipment, net | 3,608,552 | 2,775,663 | ||||||
| Intangible assets, net of amortization (Note 11) | 227,008 | 371,056 | ||||||
| Long-term notes receivable | 469,708 | 356,901 | ||||||
| Pledged notes receivable (Note 12) | 220,855 | 283,469 | ||||||
| Other assets | 284,264 | 255,288 | ||||||
| Total assets | $ | 15,538,225 | $ | 11,587,302 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Bank borrowings - short-term and maturing within one year (Note 12) | $ | 1,280,285 | $ | 242,879 | ||||
| Notes and accounts payable | 1,545,838 | 1,017,552 | ||||||
| Accrued expenses | 1,507,330 | 1,617,717 | ||||||
| Other payables | 749,006 | 270,458 | ||||||
| Deposits received | 72,910 | 751,151 | ||||||
| Receipts in advance (Note 13) | 1,901,413 | 2,305,980 | ||||||
| Income tax payable | 147,027 | 39,115 | ||||||
| Total current liabilities | 7,203,809 | 6,244,852 | ||||||
| Bank borrowings maturing after one year (Note 12) | 381,590 | 1,583,968 | ||||||
| Receipts in advance (Note 13) | 1,992,073 | 1,001,801 | ||||||
| Deposits received | 1,453,149 | 839,295 | ||||||
| Deferred liability | 41,861 | 41,775 | ||||||
| Accrued pension liabilities (Note 14) | 451,856 | 446,038 | ||||||
| Other liabilities (Note 10) | 48,791 | - | ||||||
| Total liabilities | 11,573,129 | 10,157,729 | ||||||
(Unaudited) September 30, 2009 | December 31, 2008 | |||||||
| Commitments and contingencies (Note 16) | ||||||||
| Minority interest | 316,637 | 216,754 | ||||||
| Shareholders’ equity | ||||||||
| Common stock, no par share: | ||||||||
| 60,000,000 shares authorized; 30,000,000 issued and outstanding at September 30, 2009; 25,000,000 issued and outstanding at December 31, 2008 | 9,492,138 | 8,592,138 | ||||||
| Additional paid-in capital | 194,021 | 194,021 | ||||||
| Legal reserve | 65,320 | 65,320 | ||||||
| Accumulated deficit | (4,802,355 | ) | (6,340,449 | ) | ||||
| Accumulated other comprehensive loss | (1,024,518 | ) | (1,026,713 | ) | ||||
| Net loss not recognized as pension cost | (276,147 | ) | (271,498 | ) | ||||
| Total shareholders’ equity | 3,648,459 | 1,212,819 | ||||||
| Total liabilities and shareholders’ equity | $ | 15,538,225 | $ | 11,587,302 | ||||
Kid Castle Educationalused to be a Florida corporation until the company voluntarily dissolved its Florida registration with intention to simultaneously incorporate in Delaware and convert into a Delaware corporation. Although the company immediately finalized its registration effort to convert into a Delaware Corporation,
| Three months ended September 30, | ||||||||
| 2009 | 2008 | |||||||
| Operating Revenue | ||||||||
| Sales of goods | $ | 3,155,791 | $ | 2,764,230 | ||||
| Franchising income | 561,787 | 562,351 | ||||||
| Other operating revenue | 863,745 | 744,000 | ||||||
| Total net operating revenue | 4,581,323 | 4,070,581 | ||||||
| Operating costs | ||||||||
| Cost of goods sold | (1,165,286 | ) | (1,123,317 | ) | ||||
| Cost of franchising | (84,468 | ) | (73,496 | ) | ||||
| Other operating costs | (801,365 | ) | (512,824 | ) | ||||
| Total operating costs | (2,051,119 | ) | (1,709,637 | ) | ||||
| Gross profit | 2,530,204 | 2,360,944 | ||||||
| Advertising costs | (1,975 | ) | (1,236 | ) | ||||
| Other operating expenses | (1,516,132 | ) | (1,525,122 | ) | ||||
| Income from operations | 1,012,097 | 834,586 | ||||||
| Interest expense, net | (9,257 | ) | (21,470 | ) | ||||
| Share of income (loss) of investments | (19,377 | ) | 25,429 | |||||
| Other non-operating income, net | 80,276 | 13,537 | ||||||
| Income before income taxes | 1,063,739 | 852,082 | ||||||
| Provision for taxes | (135,127 | ) | (15,893 | ) | ||||
| Income after income taxes | 928,612 | 836,189 | ||||||
| Minority interest income | (812 | ) | (19,713 | ) | ||||
| Net income | $ | 927,800 | $ | 816,476 | ||||
| Loss per share - basic and diluted | $ | 0.035 | $ | 0.03 | ||||
| Weighted-average shares used to compute earnings per share - basic and diluted | 26,666,667 | 25,000,000 | ||||||
Kid Castle Educational Corporation
| Nine months ended September 30, | ||||||||
| 2009 | 2008 | |||||||
| Operating Revenue | ||||||||
| Sales of goods | $ | 6,907,232 | $ | 6,718,848 | ||||
| Franchising income | 1,633,713 | 1,703,194 | ||||||
| Other operating revenue | 2,200,322 | 1,713,125 | ||||||
| Total net operating revenue | 10,741,267 | 10,135,167 | ||||||
| Operating costs | ||||||||
| Cost of goods sold | (2,772,082 | ) | (2,844,771 | ) | ||||
| Cost of franchising | (244,427 | ) | (260,292 | ) | ||||
| Other operating costs | (1,771,161 | ) | (1,211,993 | ) | ||||
| Total operating costs | (4,787,670 | ) | (4,317,056 | ) | ||||
| Gross profit | 5,953,597 | 5,818,111 | ||||||
| Advertising costs | (24,412 | ) | (24,316 | ) | ||||
| Other operating expenses | (4,208,206 | ) | (4,547,616 | ) | ||||
| Income from operations | 1,720,979 | 1,246,179 | ||||||
| Interest expense, net | (35,746 | ) | (70,214 | ) | ||||
| Share of income (loss) of investments | (17,164 | ) | 55,216 | |||||
| Other non-operating income, net | 129,547 | 174,385 | ||||||
| Income before income taxes | 1,797,616 | 1,405,566 | ||||||
| Provision for taxes | (247,984 | ) | (75,258 | ) | ||||
| Income after income taxes | 1,549,632 | 1,330,308 | ||||||
| Minority interest income | (11,538 | ) | (48,379 | ) | ||||
| Net income | $ | 1,538,094 | $ | 1,281,929 | ||||
| Earnings per share - basic and diluted | $ | 0.058 | $ | 0.05 | ||||
| Weighted-average shares used to compute earnings per share - basic and diluted | 26,666,667 | 25,000,000 | ||||||
| Common Stock | ||||||||||||||||||||||||||||||||
Number of shares | Amount | Additional paid-in capital | Legal reserve | Accumulated deficit | Accumulated other comprehensive loss | Net loss not recognized as pension cost | Total | |||||||||||||||||||||||||
| Balance, December 31, 2007 | 25,000,000 | $ | 8,592,138 | $ | 194,021 | $ | 65,320 | $ | (7,179,418 | ) | $ | (932,027 | ) | $ | (220,032 | ) | $ | 520,002 | ||||||||||||||
| Net income for 2008 | 838,969 | 838,969 | ||||||||||||||||||||||||||||||
| Cumulative translation adjustment | (94,686 | ) | (94,686 | ) | ||||||||||||||||||||||||||||
| Comprehensive income | 744,283 | |||||||||||||||||||||||||||||||
| Net loss not recognized as pension cost | $ | (51,466 | ) | $ | (51,466 | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2008 | 25,000,000 | $ | 8,592,138 | $ | 194,021 | $ | 65,320 | $ | (6,340,449 | ) | $ | (1,026,713 | ) | $ | (271,498 | ) | $ | 1,212,819 | ||||||||||||||
| Issuance of common stock for cash | 5,000,000 | 900,000 | 900,000 | |||||||||||||||||||||||||||||
| Net income for the nine months ended September 30, 2009 (Unaudited) | 1,538,094 | 1,538,094 | ||||||||||||||||||||||||||||||
| Cumulative translation adjustment (Unaudited) | 2,195 | 2,195 | ||||||||||||||||||||||||||||||
| Comprehensive income (Unaudited) | 1,540,289 | |||||||||||||||||||||||||||||||
| Net income not recognized as pension cost | $ | (4,649 | ) | $ | (4,649 | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2009 (Unaudited) | 30,000,000 | $ | 9,492,138 | $ | 194,021 | $ | 65,320 | $ | (4,802,355 | ) | $ | (1,024,518 | ) | $ | (276,147 | ) | $ | 3,648,459 | ||||||||||||||
| Nine months ended September 30, | ||||||||
| 2009 | 2008 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 1,538,094 | $ | 1,281,929 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation of property and equipment | 337,395 | 224,999 | ||||||
| Impairment of goodwill | 44,947 | 43,946 | ||||||
| Amortization of intangible assets | 121,660 | 130,486 | ||||||
| Allowance for sales returns | - | 80,455 | ||||||
| Allowance for doubtful debts | 62,571 | 74,760 | ||||||
| Reversal of allowance for loss on inventory obsolescence and slow-moving items | (61,700 | ) | (11,253 | ) | ||||
| Loss on disposal of PP&E | - | 726 | ||||||
| Minority interests | 11,538 | 48,379 | ||||||
| Share of gain of investments | 17,164 | (55,216 | ) | |||||
| (Increase)/decrease in: | ||||||||
| Notes and accounts receivable | (1,272,684 | ) | (926,701 | ) | ||||
| Inventories | 462,623 | 508,846 | ||||||
| Other receivables | 315,939 | (113,487 | ) | |||||
| Prepayments and other current assets | (379,538 | ) | (267,809 | ) | ||||
| Deferred income tax assets | (7,857 | ) | (3,519 | ) | ||||
| Other assets | (24,075 | ) | (86,244 | ) | ||||
| Increase/(decrease) in: | ||||||||
| Notes and accounts payable | 499,886 | 551,797 | ||||||
| Accrued expenses | (133,287 | ) | 186,367 | |||||
| Other payables | 464,305 | (334,131 | ) | |||||
| Receipts in advance | 271,360 | 253,755 | ||||||
| Income taxes payable | 104,938 | (21,786 | ) | |||||
| Deferred liability | (615 | ) | 2,537 | |||||
| Deposits received | (89,652 | ) | 26,628 | |||||
| Accrued pension liabilities | (1,780 | ) | 671 | |||||
| Other liabilities | 47,742 | - | ||||||
| Net cash provided by operating activities | 2,328,974 | 1,596,135 | ||||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (1,105,885 | ) | (362,284 | ) | ||||
| Proceeds from disposal of property and equipment | - | 2,236 | ||||||
| Prepayment of long-term investments | (1,436,765 | ) | - | |||||
| Bank fixed deposits-pledged | (7,208 | ) | 297,493 | |||||
| Pledged notes receivable | 61,299 | 155,998 | ||||||
| Net cash provided by (used in) investing activities | (2,488,559 | ) | 93,443 | |||||
| Nine months ended September 30, | ||||||||
| 2009 | 2008 | |||||||
| Cash flows from financing activities | ||||||||
| Proceeds from bank borrowings | $ | 1,084,102 | $ | - | ||||
| Proceeds from loan from related parties | 127,993 | |||||||
| Repayment of bank borrowings | (1,276,139 | ) | (1,177,680 | ) | ||||
| Repayment of loan from stockholders and transactions of related parties | (178,630 | ) | (42,426 | ) | ||||
| Issuance of common stock for cash | 900,000 | - | ||||||
| Net cash provided by (used in) financing activities | 529,333 | (1,092,113 | ) | |||||
| Net increase in cash and cash equivalents | 369,748 | 597,465 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 67,700 | (93,501 | ) | |||||
| Cash and cash equivalents at beginning of period | 1,985,818 | 1,238,212 | ||||||
| Cash and cash equivalents at end of period | $ | 2,423,266 | $ | 1,742,176 | ||||
On October 21, 2019, pursuant to a stock purchase agreement dated October 2, 2019, Cannabinoid Biosciences, Inc., a California corporation, purchased one (1) million shares of its preferred shares (one preferred share is convertible 1,000 share of common stocks) of the Company, Lawrepresenting 97.82% of the Republic of China (“ROC”) as a limited liability company. KCIT is engaged in the business of children’s education focusing on the English language. The business comprises publication, salesour total issued and distribution of related books, magazines, audio and videotapes and compact disc, franchising and sales of merchandises complementary to the business. KCIT commenced operations in April 2000 when it acquired the above business from Kid Castle Enterprises Limited which was formerly owned by Mr. Kuo-An Wang and Mr. Yu-En Chiu. Kid Castle Enterprises Limited ceased operations on December 25, 2003.
Cannabinoid Biosciences, Inc. (“CBDZ”), a California corporation was incorporated on May 6, 2014, to operate as a biotechnology and specialty pharmaceutical holding company that engages in the discovery, development, and commercialization of cures and novel therapeutics from proprietary cannabinoid, cannabidiol, endocannabinoids, phytocannabinoids, and synthetic cannabinoids product platform suitable for specific treatments in a broad range of disease areas. CBDZ engages in biopharmaceutical research and development operation with aim of identifying viable drug candidates to go into clinical trials and if successful, be submitted to the stockholdersFDA for approval. Because the Company is young and has limited or no resources, and the legal CBD industry is still in its infancy (following the 2018 Farm Bill), the Company lack of KCIT in exchangeresources is likely to affect its ability to bring an industry-wide reform as contemplated above. It would be difficult for 100%the Company to raise the necessary capital to achieve its goals.
Following the consummation of the outstanding common stockOctober 21, 2019 transactions, the Company decided to restart filing important information immediately. The Company also decided to formally restart being a public reporting company following an audit of KCIT. its financial statements by a PCAOB-registered auditor.
This acquisition of control by Cannabinoid Biosciences, Inc. transformed the Company’s business model focusing on specialized real estate operation, and the legal CBD business: (1) Ownership interest in certain businesses that extract, purchase and distribute Bulk Pure CBD, Isolate, Hemp Oil, THC-free CBD Distillate and Crude CBD Oil; (2) Partnerships with local farmers to grow farm bill compliant hemp biomass; (3) Partnerships with extract facilities across the U.S. who manufacture hemp-based ingredients to meet specific medical needs.
The CBD market in the United States is young and very fragmented, lack established process control and protocols, and is yet to establish formulations standardization.
Our goal is to lead the build-out of the CBD industry, the same way that John D Rockefeller’s Standard Oil led the build-out of the crude refining industry in the United States in the nineteenth century. Our process would entail steps that include (a) ethanol extraction system, (b) winterization to remove fats; (c) multiple rounds of rotary evaporation are used to remove plant material and other unnecessary components; (d) extract decarboxylation to transform into a crystalline structure with a proprietary post-processing technique; and (e) get the extract tested by third-party laboratories, package it, and get it ready for shipment.
At the moment, the Company is young and has limited resources, and the legal CBD industry is still in its infancy (following the 2018 Farm Bill), the Company’s lack of resources may likely to affect its ability to lead the build-out of the CBD industry as contemplated above. It may be difficult for the Company to raise the necessary capital to achieve its goals.
As a resultat the date of this reorganization, KCIT becamefiling, the Company does not currently, nor does it intend, in the future to, gain or maintain an ownership interest in any cannabis growing, marijuana dispensaries or production facilities. The Company does not grow, process, own, handle, transport, or sell cannabis or marijuana as the Company is organized and directed to operate strictly in accordance with all applicable state and federal laws.
In late 2019, the Company through its subsidiary CBDZ, acquired two CBD marketplaces that it intends to further develop and monetize in the near future. One of the two marketplaces, www.cbdhempextra.com is down and awaiting updates, the second marketplace, www.cannabidiolhemp.net is up and running but has not been monetized and is currently generating no revenue. We believe that lots of development work is still needed before we could monetize the site. While operating a wholly owned subsidiaryCBD marketplace is important to our business plan, it is not a deal breaker. In our acquisition plan, we intend to buy and consolidate viable revenue-generating CBD websites with a goal of Higoal. On October 1, 2002,consolidating and growing them.
As discussed in Note 15, on September 15, 2020, Kid Castle Educational Corporation (the “Company”), formerly King Ball International Technology Limited Corporation, entered into an exchangea stock purchase agreement with Higoal wherebycertain corporation related to our President and CEO with respect to the Companyprivate placement of 900,000 shares of its preferred stock at a purchase price of $3 in cash and a transfer of 100% interest in, and control of Community Economic Development Capital, LLC (a California Limited Liability Company). The shares were issued to the stockholdersinvestors without registration under the Securities Act of Higoal 11,880,0001933 based upon exemptions from registration provided under Section 4(2) of the Act and Regulation D promulgated thereunder. The issuances did not involve any public offering; no general solicitation or general advertising was used in connection with the offering. Community Economic Development Capital, is a specialty real estate holding company for specialized assets including, affordable housing, opportunity zones properties, medical real estate investments, hemp farms, CBD related commercial facilities, industrial and commercial real estate, and other real estate related services.
Similarly, on September 16, 2020, as part of its purchase of unregistered securities from certain corporation related to our President and CEO, the Company, received $3.00 in cash and 1,000,000 shares of commonits preferred stock, of the Companyand in exchange fortransferred 100% interest in, and control of Community Economic Development Capital, LLC (“CED Capital”), a California Limited Liability Company, and 97% of the issued and fully paid up capitaloutstanding shares of Higoal.
The consolidated financial statements of the Company therefore include GiveMePower and its wholly owned subsidiaries of Alpharidge Capital LLC. (“Alpharidge”), Community Economic Development Capital, LLC. (“CED Capital”), and Cannabinoid Biosciences, Inc. (“CBDX”), and subsidiaries, in which GiveMePower has a company whose stockholders retain the majoritycontrolling voting interest inand entities consolidated under the combined business to be treated asvariable interest entities (“VIE”) provisions of ASC 810, “Consolidation” (“ASC 810”), after elimination of intercompany transactions and accounts.
Principles of Consolidation
The consolidated financial statements include the acquirer for financial reporting purposes. Accordingly,accounts of the acquisition has been accounted for as a “reverse acquisition” whereby Higoal is deemed to have purchased the Company. However, the Company remains the legal entity and the registrant for Securities and Exchange Commission (“SEC”) reporting purposes.
NOTE 2. GOING CONCERN
Our financial statements are prepared in accordance withusing accounting principles generally accepted in the United States have been condensed or omitted pursuantof America applicable to such rules and regulations. However,a going concern, which contemplates the Group believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statementsrealization of assets and the notes thereto includedliquidation of liabilities in the Group’s audited annual financial statementsnormal course of business. We have little or insignificant ongoing revenue generating business or income and for the yearNine months ended December 31, 2008.
September 30, 2009 | December 31, 2008 | |||||||
| (Unaudited) | ||||||||
| Notes and accounts receivable | ||||||||
| - Third parties | $ | 3,720,942 | $ | 2,492,199 | ||||
| - Related parties | 99,251 | 183,597 | ||||||
| Total | 3,820,193 | 2,675,796 | ||||||
| Allowance for doubtful accounts and sales returns | (644,786 | ) | (504,028 | ) | ||||
| Notes and accounts receivable, net | $ | 3,175,407 | $ | 2,171,768 | ||||
September 30, 2009 | December 31, 2008 | |||||||
| (Unaudited) | ||||||||
| Work in process | $ | 188,499 | $ | 109,163 | ||||
| Finished goods and other merchandises | 1,616,341 | 2,130,116 | ||||||
| 1,804,840 | 2,239,279 | |||||||
| Less: Allowance for obsolete inventories and decline of market value | (248,313 | ) | (306,126 | ) | ||||
| $ | 1,556,527 | $ | 1,933,153 | |||||
September 30, 2009 | December 31, 2008 | |||||||
| (Unaudited) | ||||||||
| Other receivables - third parties: | ||||||||
| Advances to staff | $ | 91,003 | $ | 90,521 | ||||
| Other receivables | 164,477 | 304,416 | ||||||
| Sub-total | 255,480 | 394,937 | ||||||
| Other receivables - related parties | 85,035 | 1,066 | ||||||
| $ | 340,515 | $ | 396,003 | |||||
September 30, 2009 | December 31, 2008 | |||||||
| (Unaudited) | ||||||||
| Prepayments | $ | 862,228 | $ | 467,414 | ||||
| Temporary payments | - | 62 | ||||||
| Others | 9,405 | 8,141 | ||||||
| $ | 871,633 | $ | 475,617 | |||||
September 30, 2009 | December 31, 2008 | |||||||
| (Unaudited) | ||||||||
| 21st Century Kid Castle Language and Education Center (“Education Center”) (Note (i)) | ||||||||
| Investment cost | $ | 109,855 | $ | 109,628 | ||||
| Share of loss | (9,768 | ) | (42,696 | ) | ||||
| $ | 100,087 | $ | 66,932 | |||||
| Tianjin Kid Castle Educational Investment Consulting Co., Ltd. (“Tianjin Consulting”) (Note (ii)) | ||||||||
| Investment cost | $ | 102,431 | $ | 102,319 | ||||
| Share of loss | (151,322 | ) | (100,915 | ) | ||||
| (Note(ii)(A)) | $ | (48,791 | ) | $ | 1,404 | |||
| Total | $ | 100,087 | $ | 68,336 | ||||
September 30, 2009 | December 31, 2008 | |||||||
| (Unaudited) | ||||||||
| Gross carrying amount | ||||||||
| Franchise | $ | 1,044,030 | $ | 1,026,455 | ||||
| Copyrights | 613,723 | 603,391 | ||||||
| Goodwill | 235,526 | 235,039 | ||||||
| 1,893,279 | 1,864,885 | |||||||
| Less: Accumulated amortization | ||||||||
| Franchise | (991,829 | ) | (898,148 | ) | ||||
| Copyrights | (583,036 | ) | (527,967 | ) | ||||
| (1,574,865 | ) | (1,426,115 | ) | |||||
| Less: impairment of goodwill | (91,406 | ) | (67,714 | ) | ||||
| (91,406 | ) | (67,714 | ) | |||||
| Net | $ | 227,008 | $ | 371,056 | ||||
| 2010 | $ | 41,444 | ||
| $ | 41,444 |
September 30, 2009 | December 31, 2008 | |||||||
| (Unaudited) | ||||||||
| Bank term loans (Note (i)) | $ | 495,800 | $ | 514,471 | ||||
| Mid-term secured bank loan (Note (ii)) | 1,166,075 | 1,312,376 | ||||||
| 1,661,875 | 1,826,847 | |||||||
| Less: Balances maturing within one year included in current liabilities | ||||||||
| Bank term loans | 114,210 | 76,946 | ||||||
| Mid-term secured bank loan | 1,166,075 | 165,933 | ||||||
| 1,280,285 | 242,879 | |||||||
| Bank borrowings maturing after one year | $ | 381,590 | $ | 1,583,968 | ||||
September 30, 2009 | December 31, 2008 | |||||||
| (Unaudited) | ||||||||
| Current liabilities: | ||||||||
| Sales deposits received (Note (i)) | $ | 526,632 | $ | 277,823 | ||||
| Franchising income received (Note (ii)) | 836,763 | 1,480,947 | ||||||
| Subscription fees received (Note (iii)) | 457,364 | 471,088 | ||||||
| Related party | 636 | 414 | ||||||
| Others | 80,018 | 75,708 | ||||||
| 1,901,413 | 2,305,980 | |||||||
| Long-term liabilities: | ||||||||
| Franchising income received (Note (ii)) | 1,992,073 | 1,001,801 | ||||||
| $ | 3,893,486 | $ | 3,307,781 | |||||
| Nine months ended September 30, | ||||||||
| 2009 | 2008 | |||||||
| (Unaudited) | ||||||||
| Service cost | $ | - | $ | - | ||||
| Interest cost | 11,916 | 9,684 | ||||||
| Expected return on assets | (4,770 | ) | (1,569 | ) | ||||
| Amortization of unrecognized loss | 7,392 | 2,424 | ||||||
| Net periodic pension cost | $ | 14,538 | $ | 10,539 | ||||
Taiwan | PRC | Total | Corporate | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | Nine months ended September 30, 2009 | Nine months ended September 30, 2008 | |||||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||
| External revenue | $ | 4,819,416 | $ | 5,193,759 | $ | 5,921,851 | $ | 4,941,408 | $ | 10,741,267 | $ | 10,135,167 | $ | — | $ | — | $ | — | $ | — | $ | 10,741,267 | $ | 10,135,167 | ||||||||||||||||||||||||
| Inter-segment revenue | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| $ | 4,819,416 | $ | 5,193,759 | $ | 5,921,851 | $ | 4,941,408 | $ | 10,741,267 | $ | 10,135,167 | $ | — | $ | — | $ | — | $ | — | $ | 10,741,267 | $ | 10,135,167 | |||||||||||||||||||||||||
Profit from Operations | $ | 583,820 | $ | 673,668 | $ | 1,171,944 | $ | 683,818 | $ | 1,755,764 | $ | 1,357,486 | $ | (34,785 | ) | $ | (111,307 | ) | $ | — | $ | — | $ | 1,720,979 | $ | 1,246,179 | ||||||||||||||||||||||
| Capital expenditures | $ | 154,604 | $ | 75,863 | $ | 1,000,262 | $ | 207,126 | $ | 1,154,866 | $ | 282,989 | $ | — | $ | — | $ | — | $ | — | �� | $ | 1,154,866 | $ | 282,989 | |||||||||||||||||||||||
September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||||||||||||||
| Total assets | $ | 7,505,436 | $ | 6,840,662 | $ | 8,125,207 | $ | 5,305,329 | $ | 15,630,643 | $ | 12,145,991 | $ | 305,627 | $ | 2,860 | $ | (398,045 | ) | $ | (561,549 | ) | $ | 15,538,225 | $ | 11,587,302 | ||||||||||||||||||||||
| Years ending December 31, | ||||
| 2010 | $ | 418,657 | ||
| 2011 | 389,369 | |||
| 2012 | 771,248 | |||
| 2013 | 562,411 | |||
| Years 2014 to 2027 | 2,656,032 | |||
| $ | 4,797,717 |
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The summary of significant accounting policies is presented to assist in the understanding of the financial statements. These policies conform to accounting principles generally accepted in the United States of America and have been consistently applied. The Company has elected a calendar year of December 31 year-end.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Kid Castle Educational Corporation and all of our controlled subsidiary companies. All significant intercompany accounts and transactions have been eliminated. Investments in business entities in which we do not have control, but we have the ability to exercise significant influence over operating and financial policies (generally 20% to 50% ownership) are accounted for using the equity method of accounting. Operating results of acquired businesses are included in the Consolidated Statements of Income from the date of acquisition. We consolidate variable interest entities if we have operational and financial control, and are deemed to be the >50.1% beneficiary of the profit and loss of the entity. Operating results for variable interest entities in which we are determined to be the primary beneficiary are included in the Consolidated Statements of Income from the date such determination is made. For convenience and ease of reference, we refer to the financial statement caption “Income before Income Taxes and Equity Income” as “pre-tax income” throughout the Notes to the Consolidated Financial Statements.
COVID-19 Risks, Impacts and Uncertainties
COVID-19 Risks, Impacts and Uncertainties — We are subject to the risks arising from COVID-19's impacts on the residential real estate industry. Our management believes that these impacts, which include but are not limited to the following, could have a significant negative effect on our future financial position, results of operations, and cash flows: (i) prohibitions or limitations on in-person activities associated with residential real estate transactions; (ii) lack of consumer desire for in-person interactions and physical home tours; and (iii) deteriorating economic conditions, such as increased unemployment rates, recessionary conditions, lower yields on individuals' investment portfolios, and more stringent mortgage financing conditions. In addition, we have considered the impacts and uncertainties of COVID-19 in our use of estimates in preparation of our consolidated financial statements. These estimates include, but are not limited to, likelihood of achieving performance conditions under performance-based equity awards, net realizable value of inventory, and the fair value of reporting units and goodwill for impairment.
In April 2020, following the government lockdown order, we asked all employees to begin to work from their homes and we also reduced the number of hours available to each of our employees by approximately by approximately 75%. These actions taken in response to the economic impact of COVID-19 on our business resulted in a reduction of productivity for the three and nine months ended September 30, 2020. All cost related to these actions are included in general and administrative expenses, as these costs were determined to be direct and incremental.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We maintain cash balances in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. As of September 30, 2020 and December 31, 2019 we did maintain $5,341 and $10,878.00 balance of cash equivalents respectively.
Financial Instruments
The estimated fair values for financial instruments were determined at discrete points in time based on relevant market information. These estimates involved uncertainties and could not be determined with precision. The carrying amount of the our accounts payable and accruals, our accruals- related parties and loans – related parties approximate their fair values because of the short-term maturities of these instruments.
Fair Value Measurements:
ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.
Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
Our financial instruments consist of accounts payable and accruals and our accruals- related parties. The carrying amount of the out accounts payable and accruals, accruals- related parties and loans – related parties approximates their fair values because of the short-term maturities of these instruments.
The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:
Description |
| Level 1 |
|
| Level 2 |
| Level 3 | ||
|
|
|
|
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|
|
|
|
|
|
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|
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|
|
|
|
Investments – trading securities – September 30, 2020 |
| $ | 22,960 |
|
| - |
|
| - |
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|
|
Investment – Trading Securities
All investment securities are classified as trading securities and are carried at fair value in accordance with ASC 320 Investments — Debt and Equity Securities. Investment transactions are recorded on a trade date basis. Realized gains or losses on sales of investments are based on the first-in, first-out or the specific identification method. Realized and unrealized gains or losses on investments are recorded in the statements of operations as realized and unrealized gains or losses as net revenue. All investment securities are held and transacted by the Company’s broker firm, TD Ameritrade. The Company did not hold more than 3% of equity of the shares of any public companies as investments as of September 30, 2020.
All investments that are listed on a securities exchange are valued at their last sales price on the primary securities exchange on which such securities are traded on such date. Securities that are not listed on any exchange but are traded over-the-counter are valued at the mean between the last “bid” and “ask” price for such security on such date. The Company does not have any investment securities for which market quotes are not readily available.
The Company’s trading securities are held by a third-party brokerage firm, TD Ameritrade, and composed of publicly traded companies with readily available fair value which are quoted prices in active markets.
Related Party Transactions:
A related party is generally defined as (i) any person that holds 10% or more of our membership interests including such person's immediate families, (ii) our management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with us, or (iv) anyone who can significantly influence our financial and operating decisions. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. As at September 30, 2020, the Company has a loan balance of $930,350 from company that is controlled by the Company’s majority stockholder. Additionally, during the period under review, the Company paid rent $18,785 to a company that is controlled by the Company’s majority stockholder. See NOTES 7 and 14 for more details of our related party transactions.
Leases:
Prior to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. ASC 842 requires that lessees recognize right of use assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. It requires for leases longer than one year, a lessee to recognize in the statement of financial condition a right·of·use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows. ASC 842 supersedes nearly all existing lease accounting guidance under GAAP issued by the Financial Accounting Standards Board (“FASB”) including ASC Topic 840, Leases.
The accounting update also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. In addition, this uncertainty.accounting update requires expanded disclosures about the nature and terms of lease agreements.
The Company does not have operating and financing leases as of September 30, 2020. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof. The Company has reviewed the new standard and does not expect it to have a material impact to the statement of financial condition or its net capital.
Income Taxes:
Under the asset and liability method prescribed within ASC 740, Income Taxes, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. 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 realized or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The realizability of deferred tax assets is assessed throughout the year and a valuation allowance is recorded if necessary, to reduce net deferred tax assets to the amount more likely than not to be realized. Certain prior period deferred tax disclosures were reclassified to conform with current period presentation.
ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
The Company’s practice is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in selling and administrative expense. As of September 30, 2020, the Company had no accrued interest or penalties.
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Uncertain Tax Positions:
We evaluate tax positions in a two-step process. We first determine whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as long term liabilities in the financial statements.
Revenue Recognition:
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which requires that five basic steps be followed to recognize revenue: (1) a legally enforceable contract that meets criteria standards as to composition and substance is identified; (2) performance obligations relating to provision of goods or services to the customer are identified; (3) the transaction price, with consideration given to any variable, noncash, or other relevant consideration, is determined; (4) the transaction price is allocated to the performance obligations; and (5) revenue is recognized when control of goods or services is transferred to the customer with consideration given, whether that control happens over time or not. Determination of criteria (3) and (4) are based on our management’s judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustment was recorded.
The Company generates revenue primarily from: (1) the sale of homes/properties, (2) commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, and (3) sales of trading securities using its broker firm, TD Ameritrade less original purchase cost. Net trading revenues primarily consist of revenues from trading securities earned upon completion of trade, net of any trading fees. A trading is completed when earned and recognized at a point in time, on a trade-date basis, as the Company executes trades. The Company records trading revenue on a net basis, trading sales less original purchase cost. Net realized gains and losses from securities transactions are determined for federal income tax and financial reporting purposes on the first-in, first-out method and represent proceeds on disposition of investments less the cost basis of investments. Sale of real estate properties are recognized at the sales price/amount and the total cost (including cost of rehabilitations) associated with the property acquisition and rehabilitation are classified in Cost of Goods Sold (COGS).
During the nine months ended September 30, 2020, the Company did recognized revenue of $1,304,877 which comprises of $1,205,000.00 from sales of real estate properties and $99,877 from Net trading revenues respectively.
Advertising Costs:
We expense advertising costs when advertisements occur. During the Nine months ended September 30, 2020, the Company did recognized advertising costs of $16,325 compared to $24,023 it spent in Nine months ended September 30, 2019.
Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. The Company maintains cash balances at financial institutions within the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to limits of approximately $250,000. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts. It is possible that at times, the company’s cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. In such situation, the Company's management would assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures would be addressed and mitigated.
Stock Based Compensation:
The cost of equity instruments issued to non-employees in return in accordance with ASC 505-50 “Equity-Based Payments to Non-Employees” for goods and services is measured by the fair value of the goods or services received or the measurement date fair value of the equity instruments issued, whichever is the more readily determinable. Measurement date for non-employees is the earlier of performance commitment date or the completion of services. The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued in accordance with ASC 718 “Compensation - Stock Compensation.”
NOTE 4. COMMITMENTS & CONTINGENCIES
Legal Proceedings
We were not subject to any legal proceedings as of September 30, 2020 and to the best of our knowledge, no legal proceedings are pending or threatened.
The Company’s principal executive office is located at 370 Amapola Ave., Suite 200A, Torrance, CA 90501. The space is a shared office space, which at the current time is suitable for the conduct of our business. The Company has no real property and do not presently owned any interests in real estate. As at September 30, 2020, the Company has spent a total of $18,784.80 on rent which was paid to Poverty Solutions to sublet office space for the company operations.
From time to time, the Company may be involved in certain legal actions and claims arising in the normal course of business. Management is of the opinion that such matters will be resolved without material effect on the Company’s financial condition or results of operations.
Contractual Obligations
We were not subject to any contractual obligations as at September 30, 2020.
NOTE 5. NET TRADING REVENUE
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company’s net revenue primarily consists of revenues from sales of trading securities using its broker firm, TD Ameritrade less original purchase cost. Net trading revenues primarily consist of revenues from trading securities earned upon completion of trade, net of any trading fees. A trading is completed when earned and recognized at a point in time, on a trade-date basis, as the Company executes trades. The Company records trading revenue on a net basis, trading sales less original purchase cost.
Net trading revenue consisted of the following:
January 1, 2020 to September 30, 2020 | Total | |
Revenue from sales of securities | $ | 261,219 |
Cost of securities | (161,342) | |
Net trading revenue | $ | 99,877 |
NOTE 6. SALES – INVESTMENT PROPERTY
Sales and other disposition of properties from Real Estate Investments holdings:
Dispositions
Below is the schedule of the details of the Real Estate Investments sales transactions during the period:
Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | |||
Description | Amount | Amount | ||
Sales - Investment property | $ 1,205,000 | |||
Closing costs | (11,522) | |||
Commissions Paid | (60,645) | |||
Developer’s Fees | (95,750) | |||
Escrow & Title | (6,714) | |||
Cost of Investment property sold | (917,825) | |||
Old Liens Payoff | (51,879) | |||
Property Taxes | (20,064) | |||
Recording Charges | (7,048) | |||
Seller Credit | (8,380) | |||
Net Profit from Real Estate Investment Sales | $ | $ 25,173 | ||
NOTE 7. LINE OF CREDIT / LOANS - RELATED PARTIES
The Company considers its founders, managing directors, employees, significant shareholders, and the portfolio Companies to be affiliates. In addition, companies controlled by any of the above named is also classified as affiliates.
Line of credit from related party consisted of the following:
| September 30, 2020 |
| December 31, 2019 | |
September 2019 (line of credit) - Line of credit with maturity date of February 28, 2021 with 0% interest per annum with unpaid principal balance and accrued interest payable on the maturity date. | $ | 163,632 | $ | 41,200 |
May 20, 2020 (line of credit) Line of credit with maturity date of May 4, 2025 with 0% interest per annum with unpaid principal balance and accrued interest payable on the maturity date. |
| 766,717 |
| - |
July 3, 2020 (30 year term loan) Term loan with maturity date of July 2, 2050 with 3.75% interest per annum with unpaid principal balance and accrued interest payable on the maturity date. |
| 150,000 |
| - |
Total Line of credit - related party | 930,350 | 41,200 | ||
Less current portion |
| (163,632) |
| (41,200) |
Total Line of credit - related party | $ | 766,718 | $ | - |
Goldstein Franklin, Inc. - $190,000 line of credit
On February 28, 2020, the Company amended its line of credit agreement to increase it to the amount of $190,000 with maturity date of February 28, 2021. The line of credit bears interest at 0% per annum and interest and unpaid principal balance is payable on the maturity date. The Company had unused line of credit of $26,368 as of September 30, 2020
NOTE 8. EARNINGS (LOSS) PER SHARE
Net Loss per Share Calculation:
Basic net loss per common share ("EPS") is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive, assuming all dilutive potential common shares were issued. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. The Company’s diluted earnings (loss) per share is the same as the basic earnings/loss per share for the period January 1, 2020 to September 30, 2020, as there are no potential shares outstanding that would have a dilutive effect.
January 1, 2020 to September 30, 2020 | Amount | |
Net loss (income) | $ | (132,618) |
Dividends | - | |
Stock option | - | |
Adjusted net income attribution to stockholders | $ | (132,618) |
Weighted-average shares of common stock outstanding | ||
Basic and Diluted | 922,324,706 | |
Net changes in fair value at end of the period | ||
Basic and Diluted | $ | (0.000142) |
NOTE 9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of September 30, 2020 and December 31, 2019 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its business model.
We did not provide any current or deferred US federal income tax provision or benefit for any of the periods presented in these financial statements because we have accumulated substantial operating losses over the years. When it is more likely than not, that a tax asset cannot be realized through future income, we must record an allowance against any future potential future tax benefit. We have provided a full valuation allowance against the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward periods.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements as of September 30, 2020 and December 31, 2019 as defined under ASC 740, "Accounting for Income Taxes." We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of the accumulated deficit on the balance sheet.
A reconciliation of the differences between the effective and statutory income tax rates for the period ended September 30, 2020 and December 31, 2019:
Percent | 30-Sep-20 | 31-Dec-19 | ||||||||
|
|
| ||||||||
Federal statutory rates |
| 34.0 | % |
| $ | (2,698,913) |
|
| $ | (2,652,357) |
State income taxes |
| 5.0 | % |
|
| (396,899) |
|
|
| (390,052) |
Permanent differences |
| -0.5 | % |
|
| 39,690 |
|
|
| 39,005 |
Valuation allowance against net deferred tax assets |
| -38.5 | % |
|
| 3,056,122 |
|
|
| 3,003,404 |
Effective rate |
| 0 | % |
| $ | - |
|
| $ | - |
At September 30, 2020 and December 31, 2019, the significant components of the deferred tax assets are summarized below:
30-Sep-20 | 31-Dec-19 | |||||
Deferred income tax asset |
|
|
|
|
|
|
Net operation loss carryforwards |
| (7,939,509) |
|
| (7,801,050) | |
Total deferred income tax asset |
| 3,095,812 |
|
|
| 3,042,409 |
Less: valuation allowance |
| (3,095,812) |
|
| (3,042,409) | |
Total deferred income tax asset | $ | - |
|
| $ | - |
The Company has recorded as of September 30, 2020 and December 31, 2019, a valuation allowance of $3,071,232 and $3,042,409 respectively, as it believes that it is more likely than not that the deferred tax assets will not be realized in future years. Management has based its assessment on the Company’s lack of profitable operating history.
The valuation allowance $3,056,122 as at September 30, 2020 increased by $52,718 compared to December 31, 2019 of $3,003,404, as a result of the Company generating additional net operating losses of $136,928.
The Company conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of September 30, 2020 and December 31, 2019.
The Company has net operating loss carry-forwards of approximately $7,939,509. Such amounts are subject to IRS code section 382 limitations and expire in 2033.
NOTE 10. RECENTLY ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Standards
ASU 2019-12 — In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019- 12, Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740, Income Taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for the Company's fiscal year beginning October 1, 2021, with early adoption permitted. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The Company does not expect this ASU to have a material impact on its condensed consolidated financial statements.
ASU 2016-13 — In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which amends FASB ASC Topic 326, Financial Instruments - Credit Losses. In addition, in May 2019, the FASB issued ASU 2019-05, Targeted Transition Relief, which updates FASB ASU 2016-13. These ASU’s require financial assets measured at amortized cost to be presented at the net amount to be collected and broadens the information, including forecasted information incorporating more timely information, that an entity must consider in developing its expected credit loss estimate for assets measured. These ASU’s are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted for fiscal years beginning after December 15, 2018. Most of our financial assets are excluded from the requirements of this standard as they are measured at fair value or are subject to other accounting standards. In addition, certain of our other financial assets are short-term in nature and therefore are not likely to be subject to significant credit losses beyond what is already recorded under current accounting standards. As a result, we currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements, which amends FASB ASC Topic 820, Fair Value Measurements. This ASU eliminates, modifies and adds various disclosure requirements for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain disclosures are required to be applied using a retrospective approach and others using a prospective approach. Early adoption is permitted. The various disclosure requirements being eliminated, modified or added are not significant to us. As a result, we currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which amends FASB ASC Subtopic 350-40, Intangibles-Goodwill and Other-Internal-Use Software. This ASU adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this ASU should be applied either using a retrospective or prospective approach. Early adoption is permitted. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this update provide such guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In January 2013, the FASB issued ASU No. 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities." This ASU clarifies that the scope of ASU No. 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities." applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In February 2013, the FASB issued ASU No. 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." The ASU adds new disclosure requirements for items reclassified out of accumulated other comprehensive income by component and their corresponding effect on net income. The ASU is effective for public entities for fiscal years beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date." This ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In March 2013, the FASB issued ASU No. 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. We currently do not anticipate this standard to have a significant impact on our consolidated financial statements.
We have reviewed all the recently issued, but not yet effective, accounting pronouncements. Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
NOTE 11. INVESTMENT SECURITIES (TRADING)
The Company applied the fair value accounting treatment for trading securities per ASC 320, with unrealized gains and losses recorded in net income each period. Debt securities classified as trading should be measured at fair value in the currency in which the debt securities are denominated and remeasured into the investor’s functional currency using the spot exchange rate at the balance sheet date.
Investments in equity securities as of September 30, 2020 are summarized based on the following:
September 30, 2020 |
| Cost |
| Changes in Fair Value |
| Fair Value |
|
|
|
|
|
|
|
Stocks | $ | 22,366 | $ | (6,403) | $ | 15,963 |
Options |
| 20,955 |
| (13,957) |
| 6,998 |
Investments - Trading Securities | $ | 43,320 | $ | (20,360) | $ | 22,960 |
Trading securities are treated using the fair value method, whereby the value of the securities on the company’s balance sheet is equivalent to their current market value. These securities will be recorded in the current assets section under the Investment Securities account and will be offset in the shareholder’s equity section under the unrealized proceeds from sale of short-term investments” account. The Short Term Investments account amount represents the current market value of the securities, and the “Unrealized Proceeds From Sale of Short Term Investments” account represents the cash proceeds that the company would receive if it were to sell the investments at the end of the specified accounting period.
January 1, 2020 to September 30, 2020 | Amount | |
Total beginning balance - fair market | $ | 45,396 |
Total investment purchases - cost | 266,958 | |
Total investment sales - cost | (261,219) | |
Unrealized losses | (28,175) | |
Investment - Trading Securities | $ | 22,960 |
NOTE 12. REAL ESTATE INVESTMENTS
Current Holdings of Real Estate Investments (Inventory):
As at September 30, 2020, we have two available-for-sale real estate properties with a carrying amount of $970,148:
Cost basis | ||||||
9/30/2020 | ||||||
SFR - 11253 S New Hampshire, 90044 | $ | 359,821 | ||||
SFR - 4904 S Wilton Place 90062 | 610,327 | |||||
Total Holdings of Real Estate Investments | $ | 970,148 | ||||
Inventory costs include direct home acquisition costs and any capitalized improvements. The following is the Real Estate Investments activities for the period under review:
We bought the 11253 S New Hampshire, LA 90044 property in June of 2020 at a cost of 321,498. We financed the purchase with borrowing from our controlling shareholder. Our goal for the property was to rehabilitee and resell to eligible homebuyers as part of our mission of promoting homeownership affordable housing. As of September 30, 2020, we have expended $38,323 on rehabilitation of the property.
The 4904 S Wilton Place, Los Angeles, CA 90062 property was bought on April 23, 2019 for a total acquisition cost of $498,983.51. Our goal for the property was to rehabilitee and resell to eligible homebuyers as part of our mission of promoting homeownership affordable housing. As of September 30, 2020, we have expended $111,343 on rehabilitation of the property.
NOTE 13. MARGINAL LOAN PAYABLE
The Company’s subsidiary, Alpharidge Capital LLC. entered into a marginal loan agreement as part of its new trading account process in 2019 with TD Ameritrade, the Company’s brokerage to continue the purchase of securities and to fund the underfunded balance. The balance of this account as at September 30, 2020 is $5,524.
NOTE 14. RELATED PARTY TRANSACTIONS
A related party is generally defined as (i) any person that holds 10% or more of our membership interests including such person's immediate families, (ii) our management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with us, or (iv) anyone who can significantly influence our financial and operating decisions. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
The Company had the following related party transactions:
·Line of Credit – On September 15, 2019, the Company entered into a line of credit agreement in the amount of $41,200 with Goldstein Franklin, Inc. which is owned and operated by Frank I. Igwealor, Chief Executive Officer of the Company. The maturity date of the line of credit is February 15, 2020. The line of credit agreement was amended to the amount of $190,000 and maturity date of February 28, 2021. The line of credit bears interest at 0% per annum and interest and unpaid principal balance is payable on the maturity date. As at September 30, 2020, the Company had drawn $163,632.36 from the LOC.
·Line of credit - On May 5, 2020, the Company entered into a line of credit agreement in the amount of $1,500,000 with Los Angeles Community Capital, which is owned and operated by Frank I. Igwealor, Chief Executive Officer of the Company. The maturity date of the line of credit is May 4, 2025. The line of credit bears interest at 0% per annum and interest and unpaid principal balance is payable on the maturity date. The Company had unused line of credit of $1,280,902 As of September 30, 2020.
·During the period under review, the Company paid rent $18,785 to a company that is controlled by the Company’s majority stockholder.
In addition, during the nine months ended September 30, 2020, the Company pursuant to the terms of loan agreement, paid to an entity controlled by our CEO $95,750 respectively, as developer’s fees from the sales amount of the two real estate investment properties sold. Although the $95,750 was less than the 10% of the total sales amount of $1,205,000, the Company agreed with the lender to take less than 10% in accommodation because one of the two properties sold had unanticipated cost overrun.
NOTE 15. MERGERS AND ACQUISITIONS
On September 15, 2020, Kid Castle Educational Corporation (the “Company”) entered into a stock purchase agreement with certain corporation related to our President and CEO with respect to the private placement of 900,000 shares of its preferred stock at a purchase price of $3 in cash and a transfer of 100% interest in, and control of Community Economic Development Capital, LLC (a California Limited Liability Company). The shares were issued to the investors without registration under the Securities Act of 1933 based upon exemptions from registration provided under Section 4(2) of the Act and Regulation D promulgated thereunder. The issuances did not involve any public offering; no general solicitation or general advertising was used in connection with the offering. Community Economic Development Capital, is a specialty real estate holding company for specialized assets including, affordable housing, opportunity zones properties, medical real estate investments, hemp and cannabis farms, dispensaries facilities, CBD related commercial facilities, industrial and commercial real estate, and other real estate related services.
Similarly, on September 16, 2020, as part of its purchase of unregistered securities from certain corporation related to our President and CEO, the Company, received $3.00 in cash and 1,000,000 shares of its preferred stock, and in exchange transferred 100% interest in, and control of Community Economic Development Capital, LLC (“CED Capital”), a California Limited Liability Company, and 97% of the issued and outstanding shares of Cannabinoid Biosciences, Inc. (“CBDX”), to GiveMePower Corporation, a Nevada corporation. This transaction gave the Company 88% of the voting control of GiveMePower. As at the time of this transaction, all four businesses involved in the transaction were controlled by Mr. Frank I Igwealor. Because both the buyer and seller in the above acquisitions were under the control of the same person, the transaction was classified as “common control transaction and therefore fall under “Transactions Between Entities Under Common Control“ subsections of ASC 805-50. This transaction was therefore accounted for under the Consolidation Method using the variable interest entity (VIE) model wherein we consolidate all investees operating results if we expect to assume more than 50% of another entity’s expected losses or gains.
NOTE 16. SHAREHOLDERS’ DEFICIT
Preferred Stock
As of September 30, 2020 and December 31, 2019 we were authorized to issue 1,000,000 shares of preferred stock with a par value of $0.00001.
The Company has 1,000,000 and 100,000 shares of preferred stock were issued and outstanding as at September 30, 2020 and December 31, 2019 respectively.
Common Stock
The Company is authorized to issue 1,000,000,000 and 100,000,000 shares of common stock with a par value of $0.00001 as at September 30, 2020 and December 31, 2019 respectively.
Nine months ended September 30, 2020
The Company has issued 922,324,706 shares of our common stock to more than 2,500 shareholders as at September 30, 2020 and December 31, 2019 respectively.
Warrants
No warrants were issued or outstanding as at September 30, 2020 and December 31, 2019 respectively.
Stock Options
The Company has never adopted a stock option plan and has never issued any stock options.
NOTE 17 –17. SUBSEQUENT EVENTS
The Company evaluated subsequent events after September 30, 2020 through November 18, 2020, the date these financial statements were issued and has determined there have been no subsequent events for which disclosure is required.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward-Looking Statements
This reportQuarterly Report on Form 10-Q (this “Quarterly Report”) contains certain forward-looking statements within the meaning of Section 21E of thestatements. The Securities and Exchange ActCommission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,”“estimate,”“expect,”“project,”“intend,”“plan,”“believe,”“will” and similar expressions in connection with any discussion of 1934, as amended, and informationfuture operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.
We caution that the factors described herein, and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
General
The following discussion highlights Kid Castle results of operations and the principal factors that are based on the beliefs and assumptions made byhave affected our managementfinancial condition as well as information currently available to the management. When used in this document, the words “anticipate,” “believe,” “estimate,” “expect”our liquidity and similar expressions, are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are discussed under the caption “Risk Factors” in our Annual Report on Form 10-Kcapital resources for the year ended December 31, 2008. We do not intend to update these forward-looking statements.
Kid Castle Educational Corporation, a Delaware corporation, (“Kid Castle,” “the Company,” “We,” “KDCE,” "Us" or “Our’) operates and manages a portfolio of biopharmaceutical, agricultural and "pure-play" CBD assets that are (or could be) vertically integrated and "2018 Farm Bill" compliant in the United States.States of America. Kid Castle intends to engage in rollup and consolidation of CBD and Biopharma assets and operations. The preparationCompany seeks to lead the build-out of thesethe CBD industry, the same way that John D Rockefeller’s Standard Oil led the build-out of the crude refining industry in the United States in the nineteenth century. Our process would entail steps that include (a) ethanol extraction system, (b) winterization to remove fats; (c) multiple rounds of rotary evaporation are used to remove plant material and other unnecessary components; (d) extract decarboxylation to transform into a crystalline structure with a proprietary post-processing technique; and (e) get the extract tested by third-party laboratories, package it, and get it ready for shipment.
As at the date of this filing, the Company does not currently, nor does it intend, in the future to, maintain an ownership interest in any cannabis growing, marijuana dispensaries or production facilities. The Company does not grow, process, own, handle, transport, or sell cannabis or marijuana as the Company is organized and directed to operate strictly in accordance with all applicable state and federal laws.
Basis of Presentation
The unaudited consolidated financial statements requires usfor the period ended September 30, 2020 and audited financial statements for the fiscal year ended December 31, 2019 include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to product returns, bad debts, inventories, equity investments, income taxes, financing operations, pensions, commitments and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances,present fairly the results of which form the basisoperations for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ fromsuch periods have been included in 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 ourconsolidated financial statements.
Overview
Kid Castle Educational Corporation (“KDCE”) was the result of a share exchange transaction, commonly referred to as a reverse merger, pursuant to which shareholders of an offshore operating company take control of a U.S. company that has no operations (commonly referred to as a shell company), and educational tools and equipment as revenue when titlethe offshore operating company becomes a subsidiary of the productU.S. company. In KDCE case, the offshore company was Higoal Developments Ltd., which was the parent company of Kid Castle Internet Technologies Limited and risk of ownership are transferred to the customer, which occursKid Castle Education Software Development Co. Limited, KDCE’s operating companies that run our English language instruction business. The U.S. or shell company, at the time of delivery, orthe share exchange, was King Ball International Technology Corporation.
The details of KDCE corporate history are as follows. KDCE was incorporated in Florida on July 19, 1985 as Omni Doors, Inc. From inception through June 30, 1998, our primary business was the assembly and distribution of industrial doors for sale to building contractors in the South Florida market. Until April 6, 1998, we were a wholly-owned subsidiary of Millennia, Inc., a publicly-owned Delaware corporation. On April 6, 1998, the Board of Directors of Millennia declared the payment of a stock dividend to Millennia’s stockholders. Millennia stockholders received one share of our common stock for each four shares of Millennia common stock. This distribution of approximately 570,000 shares of our company represented approximately 5% of the total issued and outstanding shares of our common stock.
Pursuant to a contract dated July 14, 1998, Millennia sold 10,260,000 shares (representing 90% of the total outstanding shares) of our common stock to an unrelated firm, China Economic Growth Investment Corp., LLC, which then distributed the shares to its three members, Yong Chen, Zuxiang Huang, and Zheng Yao.
On April 6, 2001, pursuant to a stock purchase agreement dated April 2, 2001, Halter Capital Corporation, a privately-owned Texas corporation, purchased 6,822,900 shares of our common stock from Zheng Yao, representing approximately 60% of our issued and outstanding shares of common stock. Simultaneously with this change-in-control transaction, Sophia Yao, our then sole officer and director, resigned. Kevin B. Halter, Sr., as President and director, and Kevin B. Halter, Jr., as Secretary-Treasurer and director, were elected to replace her.
On June 19, 2002, pursuant to a stock purchase agreement dated June 6, 2002, Powerlink International Finance, Inc., a British Virgin Islands corporation, purchased 2,830,926 shares of our common stock from Halter Capital Corporation, representing approximately 57% of our issued and outstanding shares of common stock. Simultaneously with the purchase, the officers and directors of the Company resigned. Chin-Chung Hsu, President, Treasurer, and Director; Wen-Hao Hsu, Secretary and Director; and Chien-Hwa Liu, Director, were elected to replace them.
On June 25, 2002, we changed our name to King Ball International Technology Corporation and, on August 22, 2002, we changed our name again to Kid Castle Educational Corporation.
On March 29, 2010, the Company which has been a public reporting company registered with the Securities Exchange Commissioner (“SEC”), filed Form 15D, Suspension of Duty to Report. As a result of filing Form 15D, the Company was no longer required to file any SEC forms since March 29, 2010. Similarly, on March 22, 2011, the company voluntarily dissolved its Florida registration with intention to simultaneously incorporate in Delaware and convert into a Delaware corporation. The Company has been dormant since March 22, 2011 and non-operating since March 29, 2010.
The Company used to be a Florida corporation until March 22, 2011 when it voluntarily dissolved its Florida registration with intention to simultaneously incorporate in Delaware and convert into a Delaware corporation. Although the company immediately finalized its registration effort to convert into a Delaware Corporation, the company’s registered agent who was supposed to submit the registration package to the Delaware Secretary of State for certification, failed to make a timely submission. Later in January 2019, when the goods arrivecompany realized that the Delaware incorporation/registration package/process was never submitted to the Delaware Secretary of State nor completed in any other way or form, the Company went ahead and resubmitted the required registration package and was then formally re-incorporated in Delaware and convert into a Delaware corporation.
The re-incorporation in Delaware, which occurred in January 2019, has placed at risk, voidable and unenforceable, all and any liabilities that may have accrued, including any material agreements the Company may have executed during the period between March 22, 2011 and January 2019. To the best of our knowledge, no such liabilities that were accrued and no material agreement were entered into by the company during the period between March 22, 2011 and January 2019. In addition, there could be penalties or legal liabilities that may have accrued as a result of conducting business from 2011 to 2019 without properly registering with any State. To the best of our knowledge, as at September 7, 2020, no such penalties or liabilities has accrued to the company accrued as a result of conducting business from 2011 to 2019 without properly registering with any State. However, there is no guarantee that such penalties or liabilities would not accrue or arise in the future.
On October 21, 2019, pursuant to a stock purchase agreement dated October 2, 2019, Cannabinoid Biosciences, Inc., a California corporation, purchased one (1) million shares of its preferred shares (one preferred share is convertible 1,000 share of common stocks) of the Company, representing 97.82% of our total issued and outstanding voting shares of common stock and preferred stock. Simultaneously with the purchase, the officers and directors of the Company resigned. Frank I Igwealor, Chairman and CEO, Secretary, Treasurer, and Director; Patience C Ogbozor, Director; and Dr. Solomon SK Mbagwu, MD, Director, were elected to replace them. Following the share sales to Cannabinoid Biosciences, Inc., the purchaser converted 900,000 of the preferred shares for 900,000,000 shares of the Company's current outstanding shares of common stock.
Because we took control of the Company on October 21, 2019, we have limited knowledge of events that took place prior to October 21, 2019, which was the date that we formally took control of the management of the Company, we relied on information supplied to us by the previous management of the Company and we also relied on their filings with the SEC as shown on the SEC website.
Thus, we knew that the Company filed with the SEC to the suspension of your duty to file SEC reports after March 29, 2010. We are not aware of the circumstances that led to the decision of the previous management of the Company to seek to stop reporting. We just knew that the steps taken by the Company was not unusual since several other small reporting companies seems to also take that route when reporting obligation has gotten burdensome to them that the cost / benefit analysis was no longer favorable to those companies.
Our knowledge and understanding of the events that were contained in the Company’s SCHEDULE 13E-3 filing on June 18, 2009 was totally based on the filings themselves which is listed on the SEC website. We do not have any additional information on that matter or any other occurrence in the Company prior to the filing of the FORM 15-15D.
We only obtained information from the Company previous managers concerning the Company’s failure to re-incorporate in Delaware after termination of their Florida registration. We were satisfied with their explanation that it was oversight and not deliberate. We were also satisfied that the Company has been incorporated in Delaware by January of 2019.
Based on the foregoing, investing in the Company may carry additional risk of the unknown or whatever might has occurred in the Company prior to October 21, 2019, which was not reported alongside the Company’s filings shown on the SEC website, which is our primary source of information about the Company’s activities prior to October 21, 2019.
In late 2019, the Company through its subsidiary CBDZ, acquired two CBD marketplaces that it intends to further develop and monetize in the near future. One of the two marketplaces, www.cbdhempextra.com is down and awaiting updates, the second marketplace, www.cannabidiolhemp.net is up and running but has not been monetized and is currently generating no revenue. We believe that lots of development work is still needed before we could monetize the site. While operating a CBD marketplace is important to our business plan, it is not a deal breaker. In our acquisition plan, we intend to buy and consolidate viable revenue-generating CBD websites with a goal of consolidating and growing them.
Furthermore, during the last quarter of 2019, we entered into nonbinding Letter of Intent (LOIs) with 5 CBD operations to acquire their businesses. Each of these businesses is producing revenue and each operation is profitable. These five revenue producing and profitable businesses would cost the Company about $33.4 million to consummate the acquisitions. The five businesses comprise of: (1) a CBD Affiliate Marketplace that would cost $300,000; (2) a Hemp Farm with Real Estate, farms and extraction facilities Colorado and Kentucky which sells for $30,000,000; (3) a Michigan hemp farm with Real Estate and CBD plant which would cost $1,600,000; 4) a North Carolina Hemp grower and CDB technology with real estate selling for $1,300,000; and (5) another CBD Affiliate Marketplace going for $30,000. With the LOIs in hand, we approached some professional finance guys to help us raise the money for the acquisition. There is no guarantee that we could raise the capital needed for this acquisition or that the sellers would wait for us to raise the capital.
Subsequently, as we were pulling together financing for the acquisition, COVID-19 exploded and crippled most business transactions across the world. As a result of the disruptions occasioned by COVID-19, the operations of our major financier coming from New York and London came under the lockdown. We have informed the sellers about this situation and advised that they move on to other potential acquirers as we are completely uncertain about the where things would be after the end of COVID-19 pandemic. There is no guarantee that we could be able to acquire one or more of these businesses, or that these businesses would still be available to us to acquire in the future, or at the customer designated location, depending on the associated shipping terms. Additionally, we deliver products sold byinitially contemplated price.
On September 15, 2020, Kid Castle Educational Corporation (the “Company”) entered into a stock purchase agreement with certain corporation related to our distributors directlyPresident and CEO with respect to the distributors’ customersprivate placement of 900,000 shares of its preferred stock at a purchase price of $3 in cash and a transfer of 100% interest in, and control of Community Economic Development Capital, LLC (a California Limited Liability Company). The shares were issued to the investors without registration under the Securities Act of 1933 based upon exemptions from registration provided under Section 4(2) of the Act and Regulation D promulgated thereunder. The issuances did not involve any public offering; no general solicitation or general advertising was used in connection with the offering. Community Economic Development Capital, is a specialty real estate holding company for specialized assets including, affordable housing, opportunity zones properties, medical real estate investments, hemp and cannabis farms, dispensaries facilities, CBD related commercial facilities, industrial and commercial real estate, and other real estate related services.
Similarly, on September 16, 2020, as such the delivered goods are recognized as revenue in a similar way as salespart of its purchase of unregistered securities from certain corporation related to our direct customers. We estimate sales returnsPresident and discounts based on historical experienceCEO, the Company, received $3.00 in cash and record them as reductions1,000,000 shares of its preferred stock, and in exchange transferred 100% interest in, and control of Community Economic Development Capital, LLC (“CED Capital”), a California Limited Liability Company, and 97% of the issued and outstanding shares of Cannabinoid Biosciences, Inc. (“CBDX”), to revenues. If market conditions were to decline, we may take actions to increase sales discounts, possibly resulting in an incremental reductionGiveMePower Corporation, a Nevada corporation. This transaction gave the Company 88% of revenuethe voting control of GiveMePower. As at the time when revenues are recognized.
Our Business Objectives and Growth Strategies
Our principal business objective is to maximize stockholder returns through a combination of (1) acquisition and rollup of profitable CBD operations across the United States of America (2) sustainable long-term growth in cash flows from increased profits, which we hope to pass on to stockholders in the inabilityform of distributions, and (3) potential long-term appreciation in the value of our customersbusinesses through process optimization and financial engineering.
Mission Statement
Our vision is to make required payments. Iflead the financial conditionbuild-out of the CBD industry, the same way that John D Rockefeller’s Standard Oil led the build-out of the crude refining industry in the United States in the nineteenth century. Our process would entail steps that include (a) ethanol extraction system, (b) winterization to remove fats; (c) multiple rounds of rotary evaporation are used to remove plant material and other unnecessary components; (d) extract decarboxylation to transform into a crystalline structure with a proprietary post-processing technique; and (e) get the extract tested by third-party laboratories, package it, and get it ready for shipment.
At the moment, the Company is young and has limited resources, and the legal CBD industry is still in its infancy (following the 2018 Farm Bill), the Company’s lack of resources may likely to affect its ability to lead the build-out of the CBD industry as contemplated above. It may be difficult for the Company to raise the necessary capital to achieve its goals.
Plan of Operations for the Next Twelve Months
Kid Castle will need approximately $1,500,000 to sustain operations for the next 12 months. Our plan is to achieve meaningful revenue from acquisitions of profitable CBD businesses to meet our operating needs. However, we may not be able to increase our revenue sufficiently to meet these needs in time. It is also unlikely that we will be able to generate $1,500,000 in net income to satisfy all of our customers wereobligations and cover our operating cost for the next 12 months. Our ability to deteriorate, resultingcontinue operations will be dependent upon the successfully long-term or permanent capital in an impairmentform of equity financing, the support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurances that we will be successful, which would in turn significantly affect our ability to be successful in our new business plan. If not, we will likely be required to reduce operations or liquidate assets. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements.
We intend to implement the following tasks within the next twelve months:
The execution of our current plan of operations requires us to raise significant additional capital immediately. If we are successful in raising capital through the sale of shares or borrowing, we believe that the Company will have sufficient cash resources to fund its plan of operations for the next twelve months. If we are unable to do so, our ability to make payments,continue as a going concern will be in jeopardy, likely causing us to curtail and possibly cease operations.
We continually evaluate our plan of operations discussed above to determine the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations. The inability to secure additional allowancescapital would have a material adverse effect on us, including the possibility that we would have to sell or forego a portion or all of our assets or cease operations. If we discontinue our operations, we will not have sufficient funds to pay any amounts to our stockholders.
Even if we raise additional capital in the near future, if our current business plan is not successfully executed, our ability to fund our biopharmaceutical research and development, or our financial product deployment and services efforts would likely be seriously impaired. The ability of a biopharmaceutical research and development business and continuing operations is conditioned upon moving the development of products and services toward commercialization. If in the future we are not able to demonstrate adequate progress in the development and commercialization of our product, we will not be able to raise the capital we need to continue our business operations and business activities, and we will likely not have sufficient liquidity or cash resources to continue operating.
Because our working capital requirements depend upon numerous factors there can be no assurance that our current cash resources will be sufficient to fund our operations. At present, we have no committed external sources of capital, and do not expect any significant product revenues for the foreseeable future. Thus, we will require immediate additional financing to fund future operations. There can be no assurance, however, that we will be able to obtain funds on acceptable terms, if at all.
Competition
Our business is highly competitive. We are in direct competition with more established biopharmaceutical companies, private equity firms, private investors and management companies. Many management companies offer similar products and services for business rollups and consolidations. We may be required.
Increased competition could result in lossesus failing to attract significant capital or an inabilitymaintaining them. If we are unable to recovercompete successfully against current and future competitors, our business and financial condition may be harmed.
We hope to maintain our competitive advantage by keeping abreast of market dynamism that is face by our industry, and by utilizing the carrying valueexperience, knowledge, and expertise of our management team. Moreover, we believe that we distinguish ourselves in the ways our model envisaged transformation of businesses.
Government Regulation
Our activities currently are subject to no particular regulation by governmental agencies other than that routinely imposed on corporate businesses. However, we may be subject to the rules governing acquisition and disposition of businesses, real estates and personal properties in each of the investmentsstate where we have our operations. We may also be subject to various state laws designed to protect buyers and sellers of businesses. We cannot predict the impact of future regulations on either us or our business model. Once we commence our biopharmaceutical operations, we would be subject to many regulations that apply to pharmaceutical and medical industry participants.
Intellectual Property
We currently have no patents, trademarks or other registered intellectual property. We do not consider the grant of patents, trademarks or other registered intellectual property essential to the success of our business.
Employees
We do not have a W-2 employee at the present. Frank Ikechukwu Igwealor, our President, Chief Executive Officer and Chief Financial Officer, is our only full-time staff as of September 30, 2020, pending when we could formalize an employment contract for him. In addition to Mr. Igwealor, we have three part-time unpaid staff who helps with bookkeeping and administrative chores. Most of our part-time staff, officers, and directors will devote their time as needed to our business and are expect to devote at least 15 hours per week to our business operations. We plan on formalizing employment contract for those staff currently helping us without pay. Furthermore, in the immediate future, we intend to use independent contractors and consultants to assist in many aspects of our business on an as needed basis pending financial resources being available. We may use independent contractors and consultants once we receive sufficient funding to hire additional employees. Even then, we will principally rely on independent contractors for substantially all of our technical and marketing needs.
The Company has no written employment contract or agreement with any person. Currently, we are not actively seeking additional employees or engaging any consultants through a formal written agreement or contract. Services are provided on an as-needed basis to date. This may change in the event that we are able to secure financing through equity or loans to the Company. As our company grows, we expect to hire more full-time employees.
Components of Our Results of Operations
Revenue
We generate revenue primarily from net revenue from trading, commissions and fees charged on each real estate services transaction closed by our lead agents or partner agents, and from the sale of homes.
Real Estate Services Revenue
Brokerage Revenue—Brokerage revenue includes our offer and listing services, where our lead agents represent homebuyers and home sellers. We recognize commission-based brokerage revenue upon closing of a brokerage transaction, less the amount of any commission refunds, closing-cost reductions, or promotional offers that may not be reflectedresult in an investment’s current carrying value, thereby possibly requiring an impairment charge ina material right. Brokerage revenue is affected by the future.
Partner Revenue—Partner revenue consists of fees paid to us from partner agents or under other referral agreements, less the amount of any payments we make to customers. We recognize these fees as revenue on the closing of a transaction. Partner revenue is affected by the number of partner transactions closed, home-sale prices, commission rates, and the amount we refund to customers. If the portion of customers we introduce to our own lead agents increases, we expect the portion of revenue closed by partner agents to decrease.
Properties Revenue
Properties Revenue—Properties revenue consists of revenue earned when we sell homes that we previously bought directly from homeowners. Properties revenue is recorded at cost. Major improvements and betterments to existing facilities and equipment are capitalized. Expenditures for maintenance and repairs that do not extendclosing on a gross basis, representing the lifesales price of the applicable assethome.
Other Revenue
Other Revenue—Other services revenue includes fees earned from mortgage origination services, title settlement services, Walk Score data services, and advertising. Substantially all fees and revenue from other services are chargedrecognized when the service is provided.
Intercompany Eliminations
Intercompany Eliminations—Revenue earned from transactions between operating segments are eliminated in consolidating our financial statements. Intercompany transactions primarily consist of services performed from our real estate services segment for our properties segment.
Cost of Revenue and Gross Margin
Cost of revenue consists primarily of home-touring and field expenses, listing expenses, home costs related to expense as incurred. Buildings are depreciated over a 50-year term. Fixturesour properties segment, office and equipment are depreciated using the straight-line method over their estimated useful lives, which range from two-and-a-half yearsoccupancy expenses, and depreciation and amortization related to ten years.
Gross profit is revenue less cost of an asset may not be recoverable. Recoverabilityrevenue. Gross margin is gross profit expressed as a percentage of assetsrevenue. Our gross margin has and will continue to be held and used is measuredaffected by a comparisonnumber of factors, but the carrying amountmost important are the mix of an asset to undiscounted future net cash flows expected to be generated byrevenue from our relatively higher-gross-margin real estate services segment and our relatively lower-gross-margin properties segment, real estate services revenue per transaction, agent and support-staff productivity, personnel costs and transaction bonuses, and, for properties, the asset over its remaining useful life. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounthome purchase costs.
Results of the assets exceeds the fair value of the assets. The estimate of fair value is generally based on quoted market prices or on the best available information, including prices for similar assets and the results of using other valuation techniques.Operations
Three Months ended September 30, 2009, the balance of our amortizable intangible assets was $82,888, including franchise-related intangible assets of $52,2012020
Revenue and copyrights of $30,687. The amortizable intangible assets are amortized on a straight-line basis over estimated useful lives of 10 years, and the balance of goodwill was $144,120, which is tested for impairment on a recurring basis. In determining the useful lives and recoverability of the intangibles, assumptions must be made regarding estimated future cash flows and other factors to determine the fair value of the assets, which may not represent the true fair value. If these estimates or their related assumptions change in the future, there may be significant impact on our results of operations in the period of the change incurred.
Operating Expenses ― Total operating revenue comprises the increase in the sales of goods of $391,561, of other operating revenue of $119,745, and decrease in franchising income of $564.
Net income ― Net loss from operations for the three months ended September 30, 2009 (a 14% increase),2020 was mainly due to the increase in sales in PRC operations.$3,315. Unrealized loss (gain) from securities trading was $39,359. Dividends were $152.00. Net loss before taxation was $42,676.
Franchising income. The decrease in franchising income, from $562,381 for the three monthsNine Months ended September 30, 20082020, as Compared to $561,787 for the three monthsNine Months ended September 30, 2009 (a 0.1% decrease), was mainly due to the difference2019
Revenue and net gain from sales of investments under trading securities ― The Company recorded $99,877 in the exchange rates between the two periods.
Operating Expenses ― Total operating expenses for the nine months ended September 30, 2008. This2020 was mainly$129,608 as compared to $0.00 in the same period in, 2019, due to increased operating activities during the increaseperiod ended September 30, 2020.
Net Loss ― Net loss from operations for nine months ended September 30, 2020 was $4,559. Unrealized loss (gain) from securities trading was $39,312. Net interest income was $0.00 and Dividends were $173.00. Net loss before taxation was $132,618.
Financial Condition, Liquidity and Capital Resources
As of September 30, 2020, the Company had a working capital of $828,499, consisting of $5,341 in salescash, $22,961 in Trading Securities, $970,148 in investment properties inventory, minus $5,542 in marginal loan payable, and $163,632 of goodsline credit.
The Company had $22,961 inventory of $188,384 and other operating revenuesTrading Securities as of $487,197, decrease in franchising income of $69,481.
For the nine months ended September 30, 2008 to $6,907,2322020, the Company used $104,360 on operating activities, generated $524,328 on investing activities and used $426,860 from financing activities, resulting in a decrease in total cash of $6,891 and a cash balance of $5,341 for the nine monthsperiod.
Total Notes Payable for related and unrelated parties increased by $453,761 for the period ended September 30, 2009. The increase was mainly due to the increase in sales in PRC operations.
As of September 30, 2009,2020, total stockholders’ deficit increased to $74,966 compared to $(379) as of December 31, 2019.
As of September 30, 2020, the Company had a cash balance of $5,341 (i.e. cash is used to fund operations). The Company does not believe our current cash balances will be sufficient to allow us to fund our operating plan for the next twelve months. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations or substantially curtail its drug development activities. These conditions raise substantial doubt as to our ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should we be unable to continue as a going concern.
Our principal sources of liquidity included cash and bank balances of $2,423,266, which increased $437,375 from the balance of $1,985,818 at December 31, 2008. The increase was mainly due to the capital injection of $900,000. The primary purpose of the capital injection was to finance the Company’s privatization plan, announced by the Company’s Report on Form 8-K filed with the Commission on June 18, 2009. The privatization plan is pending review by the Commission of the Company’s preliminary Schedule 13E-3 and preliminary Information Statement on Schedule 14C, each filed with the Commission on June 18, 2009 and subsequently amended on September 9, 2009 and November 2, 2009.
Our financial statements do not include any adjustments to reflect the Group has operated direct-owned schools since 2007. Duepossible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties. Our ability to the rapid expansion ofcontinue as a going concern is dependent upon our ability to raise additional debt or equity funding to meet our ongoing operating expenses and ultimately in merging with another entity with experienced management and profitable operations. No assurances can be given that we will be successful in achieving these objectives.
We have not established revenue generating operations and will be dependent upon obtaining financing to pursue any future extensive acquisitions and activities. The revenues, if any, generated from our operations in the PRC, the Group foreseesor acquisitions may not be sufficient to fund our operations or planned growth. We will require additional need for funds in the near future to facilitate its expansion plans during 2009. As discussed in Note 12 to our Condensed Consolidated Financial Statements, the majority of the Group’s existing loans are guaranteed by two directors of the Group who have expressed their willingnesscapital to continue to supportoperate our business, and to further expand our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the Group untiltime period required or at all, and we may not obtain the capital we require by other sources of funds have been obtained. Moreover, management believes that,means.
We will now be obligated to file annual, quarterly and current reports with the supportSEC pursuant to the Exchange Act. In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board have imposed various requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time- consuming and costly. In order to meet the needs to comply with the requirements of the directors and continuous PRC sales, the Company would have sufficient funds for its operations, but maySecurities Exchange Act, we will need new a bank facility to fulfill its business plan to expand its operations in the future.
Off-Balance Sheet Arrangements
As of September 30, 2009,2020, we did not engage in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC under the Securities Exchange Act of 1934.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as one of our financing sources. As of September 30, 2009 and 2008, the balances of bank borrowings, including current and non-current portions, were $1,661,875 and $1,826,847, respectively.
Based on this definition, we have identified the critical accounting policies and funded defined contribution retirement plan (the “New Plan”) covering all regular employees of KCIT, our subsidiary in Taiwan, and the benefit retirement plan (the “Old Plan”)judgments addressed which commenced in September 2003, and only applies to the regular employees of KCIT who were employed prior to September 2005, asare described in Note14Note 2 to our Condensed Consolidated Financial Statements. The benefits expected to be paidcondensed consolidated financial statements included elsewhere in each of the next five fiscal years,this Quarterly Report. Although we believe that our estimates, assumptions and in the aggregate for the five fiscal years thereafter,judgments are $0 and $16,735, respectively. We also make defined contributions to a retirement benefits plan for our employees in the PRC in accordance with local regulations. The contributions made by us for the nine months ended September 30, 2009 and 2008 amounted to $55,290, and $41,865, respectively.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for fiscal year 2009, we have projected that, if interest rates were to increase by one percent, the result would be an annual increase in our interest expense of $15,961. This analysis does not take into consideration the effect of changes in the level of overall economic activity on interest rate fluctuations.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 13a-15(b), we have carried out an evaluation (the “Evaluation”), under the supervision and with the participation of our management, has performedincluding our Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of our management, and the design and operation of our disclosure controls and procedures as of September 30, 2020. Based upon an evaluation of the effectiveness of disclosure controls and procedures, our Chief Executive Officer and Interim Chief Financial Officer has concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures. The term disclosure controls and procedures as(as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act Rule 13a-15(e) means controls and other proceduresAct) were not effective because of an issuer that are designedthe material weaknesses described below, in order to ensureprovide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under theour Exchange Act reports is recorded, processed, summarized and reported within the time periods specified inby the SEC’s rules and forms. Disclosure controlsforms of the SEC and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executivethe Chief Executive Officer and principal financial officers, or persons performing similar functions,Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Due to our auditorslimited resources, the following material weaknesses in past reviews, and other issues noted by management in its evaluation, that as of September 30, 2009 our disclosure controls and procedures are ineffective. Several quarters ago we began taking measures to improve our disclosure controls and procedures. We initiated the installment of a new Enterprise Resource Planning (“ERP”) system and engaged an outside accounting firm to advise the Company with respect to setting up internal auditing and other controls and procedures. The ERP system, when fully operational, will enable the centralization of all information required to be disclosed pursuant to the Exchange Act to be digitally recorded, processed, summarized and reported in a timely and secured manner. During the final phase of ERP system integration, certain difficulties have been encountered that have prevented the ERP system to be satisfactorily declared effective and independently operational by management. One cause of the delay was that the company hired to assist with our implementation of the new ERP system unexpectedly ceased its operation in September 2008. We are currently searching for the right consulting company to assist us with integration of the RRP system as well as provide on-going monitoring, guidance and supervisory support. Management anticipates that the new system will become fully operational in the fourth fiscal quarter 2010. The old system used by the Company will then be phased out.
● | we do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); | |
● | we do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our limited size and early stage nature of operations, segregation of all conflicting duties may not always be possible and may not be economically feasible; however, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals; | |
● | we do not have an independent audit committee of our Board of Directors; | |
● | insufficient monitoring and review controls over the financial reporting closing process, including the lack of individuals with current knowledge of GAAP that led to the restatement of our previously issued financial statements; and | |
● | we continue to outsource the functions of controller on an interim basis to assist us in implementing the necessary financial controls over the financial reporting and the utilization of internal management and staff to effectuate these controls. |
We believe that these material weaknesses primarily related, in part, to our lack of sufficient staff with appropriate training in GAAP and SEC rules and regulations with respect to financial reporting functions, and the lack of robust accounting systems, as well as the lack of sufficient resources to hire such staff and implement these accounting systems.
If and when our financial resources allow, we plan to take a number of actions to correct these material weaknesses including, but not limited to, establishing an audit committee of our Board of Directors comprised of three independent directors, hiring a full-time Chief Financial Officer, adding experienced accounting and financial personnel and retaining third-party consultants to review our internal controls and recommend improvements.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Control Over Financial Reporting
There were no material changes in our internal control over financial reporting (as defined in Rule 13a- 15(f) under the Exchange Act) that occurred as of September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
CEO and CFO Certifications
Exhibits 31.1 and 31.2 to this Quarterly Report are the last quarter, we have continuedCertifications of the efforts to implement the integration of a comprehensive ERP system that, when fully operational, will enhance our internal controls over financial reporting. The ERP system has been fully installedChief Executive Officer and the system has been runningInterim Chief Financial Officer, respectively. These Certifications are required in parallelaccordance with Section 302 of the Sarbanes-Oxley Act (the “Section 302 Certifications”). This Item 4 of this Quarterly Report, which you are currently reading, is the information concerning the Evaluation referred to above and in the Section 302 Certifications and this information should be read in conjunction with the old system since 2007. The system is expected to be fully operational inSection 302 Certifications for a more complete understanding of the fourth fiscal quarter 2010. The ERP system will perform the following functions:
topics presented.
|
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings that have nooccurred within the past ten years concerning our directors or officers which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.
From time to time we may be involved in litigation relating to claims arising out of the operation of our business in the normal course of business. Other than as described below, as of the date of this Registration Statement we are not aware of potential dispute or pending litigation and are not currently involved in a litigation proceeding or governmental actions the outcome of which in management’s opinion would be material pending legal proceedings.
On February 20, 2019, Plaintiff Maria De Lourdes Perez filed a complaint against defendants City of Carson, Goldstein Franklin, Inc., Frank Igwealor, Healthy Foods Markets, LLC, Optimal Foods, LLC, and Blockchain Capital LLC. The complaint alleged statutory liability pursuant to government code section 835, gross negligence, and premises liability for a trip-and-fall that occurred on April 11, 2018 at a property owned and controlled by Healthy Foods Markets, LLC. Defendants Goldstein Franklin, Inc., Frank Igwealor, Optimal Foods, LLC, and Blockchain Capital LLC. had answered the readercomplaint and also requested a demurrer on the grounds that these risk factors may(1) Defendants are not be exhaustive. We operatea proper party in interest and there was a continually changing business environment and new risk facts emerge from time to time. Management cannot predict such new risk factors, nor can we assessmisjoinder of defendants. Our attorney has advised that the complaint would not have an adverse impact if any, of such new risk factors on our businessMr. Igwealor or the extentCompany because the scope of liability is restricted to healthy Food Markets, LLC.
As of September 30, 2020, except for the complaint listed above, there was no material proceeding to which any factor,of our directors, officers, affiliates or combinationstockholders is a party adverse to us. During the past ten years, no present director, executive officer or person nominated to become a director or an executive officer of factors, may impact our business. Thereus:
(1) had a petition under the federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within ten years before the time of such filing;
(2) was convicted in a criminal proceeding or subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any of the following activities:
i. acting as a futures commission merchant, introducing broker, commodity trading advisor commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
ii. engaging in any type of business practice; or
iii. engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; or
(4) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of an federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3) (i), above, or to be associated with persons engaged in any such activity; or
(5) was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and for which the judgment has not been any material changes during the quarter ended September 30, 2009 from the risk factors disclosed in the above-mentioned Form 10-K for the year ended December 31, 2008.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
During the Nine months ended September 30, 2020, the Company issued 900,000 shares of its preferred stock to Video River Networks, Inc. in exchange for $3 and 100% interest in Community Economic Development Capital, LLC. The shares were issued to the investors without registration under the Securities Act of 1933 based upon exemptions from registration provided under Section 4(2) of the Act and Regulation D promulgated thereunder. The issuances did not involve any public offering; no general solicitation or general advertising was used in connection with the offering. Community Economic Development Capital, is a specialty real estate holding company for specialized assets including, affordable housing, opportunity zones properties, medical real estate investments, hemp farms, CBD related commercial facilities, industrial and commercial real estate, and other real estate related services.
Use of Proceeds of Registered Securities
Not applicable.
Purchases of Equity Securities by Us and Affiliated Purchasers
During the Nine months ended September 30, 2020, the Company has not purchased any equity securities nor have any officers or directors of the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is not aware of any defaults upon its senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit | ||
Number | Description | |
10.1* | Form of Line of Credit Agreement by and between the Company and certain related parties | |
31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
32.1** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
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. |
** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
KID CASTLE EDUCATIONAL CORPORATION | ||
Date: November 18, 2020 | By: | /s/ Frank I Igwealor |
Frank I Igwealor | ||
President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
Exhibit 31.1
CERTIFICATION OF CEO PURSUANT TO RULE 13a-14(a) OR 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Frank I Igwealor, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of KID CASTLE EDUCATIONAL CORPORATION;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Frank I Igwealor | |
Frank I Igwealor | |
President and Chief Executive Officer |
Date: November 18, 2020
Exhibit 31.2
CERTIFICATION OF CFO PURSUANT TO RULE 13a-14(a) OR 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Frank I Igwealor, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of KID CASTLE EDUCATIONAL CORPORATION;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Frank I Igwealor | |
Frank I Igwealor | |
Interim Chief Financial Officer |
Date: November 18, 2020
Exhibit 32.1
CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of KID CASTLE EDUCATIONAL CORPORATION (the “Company”) on Form 10-Q for the quarter ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frank I Igwealor, the Chief Executive Officer and Interim Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Frank I Igwealor | |
Frank I Igwealor | |
President, Chief Executive Officer and Interim Chief Financial Officer |
Date: November 18, 2020
This Certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.