UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
Amendment No. 2
X.QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED May 31, 2016
.TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM __________ to __________
Commission File Number 333-150061
CHERUBIM INTERESTS INC.
(Exact name of small business issuer as specified in its charter)
NEVADA |
| 98-0585268 |
(State of other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
1304 Norwood Dr. Bedford TX. 76022 |
(Address of Principal Executive Offices) (Zip Code) |
Issuer's telephone number:844 842 8872
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X.No .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes .No X.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):
Large accelerated filer | . | Accelerated filer | . |
Non-accelerated filer | . (Do not check if a smaller reporting company) | Smaller reporting company | X. |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes .No X.
As of May 31, 2016 there were 3,862,296,184 shares of common stock, par value $0.00001, outstanding.
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INDEX |
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PART I - FINANCIAL INFORMATION | 3 |
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ITEM 1. FINANCIAL STATEMENTS | 3 |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION | 10 |
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ITEM 4. CONTROLS AND PROCEDURES | 13 |
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PART II - OTHER INFORMATION | 14 |
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ITEM 1A. RISK FACTORS | 14 |
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES | 15 |
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ITEM 5. OTHER INFORMATION | 15 |
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ITEM 6. EXHIBITS | 15 |
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SIGNATURES | 16 |
2
CHERUBIM INTERESTS INC.
UNAUDITED FINANCIAL STATEMENTS
May 31, 2016
3
CHERUBIM INTERESTS INC.
Condensed Consolidated Balance Sheet (Unaudited)
|
| May 31, 2016 |
| August 31, 2015 | ||
|
|
|
|
|
| |
ASSETS |
|
|
|
| ||
Current assets |
|
|
|
|
| |
| Cash | $ | 90,107 |
| $ | 16,293 |
| Due from Related Party |
| 42,844 |
|
| - |
| Prepaid costs |
| 5,507 |
|
| - |
Total current assets |
| 138,458 |
|
| 16,293 | |
| Property and equipment |
| 12,411 |
|
| 3,572 |
|
|
|
|
|
|
|
Total assets | $ | 150,869 |
| $ | 19,865 | |
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|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
| |
|
|
|
|
|
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Current liabilities |
|
|
|
|
| |
| Accounts payable | $ | 35,336 |
| $ | - |
| Deferred Revenue |
| 121,721 |
|
| - |
| Notes payable |
| 758,340 |
|
| 1,179,993 |
| Unclaimed debt |
| 580,006 |
|
| 557,876 |
| Accrued interest |
| 571,796 |
|
| 532,454 |
| Derivative liability |
| 86,168 |
|
| 432,293 |
| Accrued expenses and other liabilities |
| 62,123 |
|
| 214,230 |
Total current liabilities |
| 2,215,490 |
|
| 2,916,846 | |
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Total liabilities |
| 2,215,490 |
|
| 2,916,846 | |
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Stockholders' Deficit |
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| |
| Common stock, $0.00001 par value; 5,000,000,000 shares authorized; 3,862,329,167 and 125,025,261 issued and outstanding at May 31, 2016 and August 31, 2015, respectively |
| 38,618 |
|
| 125,025 |
| Series B preferred stock to be issued |
| (1) |
|
| - |
| Shares held in escrow |
| (10,000) |
|
| (10,000) |
| Additional paid in capital |
| 4,169,507 |
|
| 1,203,715 |
| Accumulated deficit |
| (6,262,745) |
|
| (4,215,721) |
|
|
|
|
|
|
|
Total stockholders' deficit |
| (2,064,621) |
|
| (2,896,981) | |
|
|
|
|
|
|
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Total liabilities and stockholders' deficit | $ | 150,869 |
| $ | 19,865 | |
See accompanying notes to unaudited condensed consolidated financial statements
4
CHERUBIM INTERESTS INC.
Condensed Consolidated Statements of Operations (unaudited)
|
| Three months ended |
| Nine months ended | ||||||||
|
| May 31, |
| May 31, |
| May 31, |
| May 31, | ||||
|
| 2016 |
| 2015 |
| 2016 |
| 2015 | ||||
Revenues | $ | 27,937 |
| $ | - |
| $ | 27,937 |
| $ | - | |
Cost of Goods Sold |
| 19,975 |
|
| - |
|
| 19,975 |
|
| - | |
|
|
|
|
|
|
|
|
|
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Gross Profit |
| 7,962 |
|
| - |
|
| 7,962 |
|
| - | |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
| |
| Compensation expense |
| 114,375 |
|
| - |
|
| 2,404,206 |
|
| - |
| Professional fees |
| 3,381 |
|
| (289,480) |
|
| 21,081 |
|
| 32,756 |
| Travel and promotion |
| 3,041 |
|
| 2 |
|
| 7,266 |
|
| 21,776 |
| Depreciation |
| 1,220 |
|
| - |
|
| 3,661 |
|
| - |
| General and administrative |
| 12,870 |
|
| 282 |
|
| 48,456 |
|
| 14,845 |
Total operating expenses |
| 134,887 |
|
| (289,196) |
|
| 2,484,670 |
|
| 69,377 | |
|
|
|
|
|
|
|
|
|
|
|
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| (Income) loss from operations |
| 126,925 |
|
| (289,196) |
|
| 2,476,708 |
|
| 69,377 |
|
|
|
|
|
|
|
|
|
|
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Other income (expense) |
|
|
|
|
|
|
|
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| |
| Interest expense |
| (32,783) |
|
| (40,752) |
|
| (105,587) |
|
| (106,544) |
| Debt discount |
| - |
|
| - |
|
| - |
|
| (65,500) |
| Derivative recovery |
| (50,610) |
|
| (9,717) |
|
| 346,126 |
|
| 110,834 |
| Loss on extinguishment of debt |
| - |
|
| - |
|
| (35,925) |
|
| 22,085 |
| Forgiveness of debt income |
| 225,070 |
|
| - |
|
| 225,070 |
|
| - |
Total other income (expense) |
| 141,677 |
|
| (50,469) |
|
| 429,684 |
|
| (39,125) | |
|
|
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|
|
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|
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Income (loss) before provision for income taxes |
| 14,752 |
|
| 238,727 |
|
| (2,047,024) |
|
| (108,502) | |
|
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|
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Provision for income taxes |
| - |
|
| - |
|
| - |
|
| - | |
|
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|
|
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Net income (loss) | $ | 14,752 |
| $ | 238,727 |
| $ | (2,047,024) |
| $ | (108,502) | |
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Basic and diluted income (loss) per common share | $ | 0.00 |
| $ | (0.00) |
| $ | (0.00) |
| $ | (0.00) | |
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Weighted average shares outstanding |
| 3,555,139,779 |
|
| 77,626,880 |
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| 3,862,329,167 |
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| 71,588,171 | |
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See accompanying notes to unaudited condensed consolidated financial statements
5
CHERUBIM INTERESTS INC.
Condensed Consolidated Statements of Cash Flows (unaudited)
| Nine month ended | ||||||
| May 31, 2016 |
| May 31, 2015 | ||||
Cash flows from operating activities |
|
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| ||
| Net loss | $ | (2,047,024) |
| $ | (108,502) | |
| Adjustments to reconcile net loss to net cash used in operating activities |
|
| ||||
|
| Change in derivative liability |
| (346,125) |
|
| (110,834) |
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| Debt discount |
| - |
|
| 65,500 |
|
| Common stock issued for services |
| 2,160,000 |
|
| 157,500 |
|
| Extinguishment of debt |
| (35,925) |
|
| (20,506) |
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| Bad debt expense |
| - |
|
| - |
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| Depreciation |
| 3,661 |
|
| - |
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| Debt converted to equity |
| 173,556 |
|
| - |
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| Forgiveness of debt |
| (225,070) |
|
| - |
| Changes in operating assets and liabilities: |
|
|
|
|
| |
|
| Prepaid costs |
| (5,507) |
|
| - |
|
| Accounts payable |
| 35,336 |
|
| (25,631) |
|
| Deferred revenue |
| 121,721 |
|
| - |
|
| Interest payable |
| 39,342 |
|
| 104,965 |
|
| Accrued expenses and other liabilities |
| 162,342 |
|
| (164,481) |
Cash provided by (used in) operating activities |
| 36,307 |
|
| (101,989) | ||
|
|
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Cash flows from investing activities |
|
|
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| ||
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| Investment in oil and natural gas property |
| - |
|
| 25,000 |
|
| Purchase of fixed assets |
| (12,500) |
|
| - |
Cash flows used in investing activities |
| (12,500) |
|
| 25,000 | ||
|
|
|
|
|
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Cash flows from financing activities |
|
|
|
|
| ||
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| Proceeds from related party loan |
| 92,851 |
|
| - |
|
| Due to(from) related parties |
| (42.844) |
|
| - |
|
| Proceeds from notes payable |
| - |
|
| 65,500 |
Cash provided by financing activities |
| 50,007 |
|
| 65,500 | ||
|
|
|
|
|
|
|
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| Net change in cash |
| 73,814 |
|
| (11,489) |
|
| Cash at beginning of period |
| 16,293 |
|
| 11,489 |
|
| Cash at end of period | $ | 90,107 |
| $ | - |
|
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|
|
|
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Supplemental cash flow Information: |
|
|
|
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| ||
| Cash paid for interest | $ | - |
| $ | - | |
| Cash paid for income taxes | $ | - |
| $ | - | |
| Notes payable converted to common stock | $ | - |
| $ | 80,000 | |
See accompanying notes to unaudited condensed consolidated financial statements
6
Notes to Consolidated Unaudited Condensed Financial Statements
May 31, 2016
NOTE 1 – CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by Cherubim Interests Inc. (the "Company") without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at May 31, 2016 and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s August 31, 2015 and 2014 audited financial statements. The results of operations for the period ended May 31, 2016 are not necessarily indicative of the operating results for the full year.
NOTE 2 – NATURE OF BUSINESS
Cherubim Interests Inc. ("Company") was organized September 27, 2006 under the laws of the State of Nevada for the purpose of selling new food products produced or developed by North American companies to foreign markets. On August 31, 2009, the Company discontinued its involvement in the sales of tea due to a strategic change in business focus by the acquisition of mineral rights as disclosed in the Company's 8-K filed with the Securities and Exchange Commission on September 2, 2009. The Company currently has limited operations or realized revenues from its planned principle business purpose and, in accordance with ASC 915, "Development Stage Entities", formerly known as SFAS 7, "Accounting and Reporting by Development State Enterprises." is considered a Development Stage Enterprise. The Company was incorporated in the State of Nevada, United States of America on September 27, 2006 and its fiscal year end is August 31. The Company was engaged in sales of new food products produced or developed by North American companies to foreign markets and discontinued that business in August 2009. The Company previously operated in the oil and gas industry, focused on the exploration for and development of oil and gas properties. Cherubim Interests now targets alternative, commercial, single and multifamily dwelling opportunities for the purpose of investment purchase. It also provides renovation services to third party multifamily dwelling unit owners on a turn-key basis. Cherubim Interests specializes in covering the entire spectrum of development – including due diligence, acquisition, planning, construction, renovation, and property management. This comprehensive expertise allows the company to provide complete beginning-to-end development programs for all acquisitions. Cherubim Interests LLC, is a 100% wholly-owned subsidiary of Cherubim Interests Inc. and acts as a construction subcontractor for the company. Victura Roofing LLC, is a 100% wholly-owned subsidiary of Cherubim Interests Inc. and acts as a residential and commercial roofing subcontractor for the company.
NOTE 3 – GOING CONCERN
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. The Company has accumulated deficit since inception of $6,262,745 and a negative working capital of $2,047,024 as of May 31, 2016. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has minimal cash and no material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock and/or preferred stock in order to implement its business plan. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company.
7
CHERUBIM INTERESTS INC.
Notes to Consolidated Unaudited Condensed Financial Statements
May 31, 2016
NOTE 4 - CONVERTIBLE NOTES PAYABLE
As of May 31, 2016 the convertible notes payable consisted of:
Date of |
|
|
| Interest |
| Conversion |
| Maturity |
| Principal |
| Net |
Note |
| Noteholder |
| Rate |
| Rate |
| Date |
| Amount |
| Note |
|
|
|
|
|
|
|
|
|
|
|
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|
Various |
| J. Gingerich |
| 10% |
| 50% |
| Various |
| $815,880 |
| $658,067 |
|
|
|
|
|
|
|
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|
|
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|
8/15/14 |
| LG Capital, Inc, |
| 8% |
| 55% |
| 4/15/15 |
| $36,750 |
| $20,082 |
|
|
|
|
|
|
|
|
|
|
|
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|
9/14/14 |
| Bay Street Capital |
| 8% |
| 50% |
| 5/14/15 |
| $25,000 |
| $22,300 |
|
|
|
|
|
|
|
|
|
|
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|
7/31/15 |
| Auctus Fund, LLC |
| 10% |
| 50% |
| 1/31/16 |
| $45,750 |
| $45,750 |
|
|
|
|
|
|
|
|
|
|
|
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|
Various |
| Chic & Savvy |
| 10% |
| 50% |
| Various |
| $9,450 |
| $9,450 |
|
|
|
|
|
|
|
|
|
|
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|
Various |
| Small Miscellaneous Other |
| 10% |
| 50% |
| Various |
|
|
| $2,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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| $758,340 |
NOTE 5 – DERIVATIVE LIABILITIES
In accordance with ASC 815, the Company has bifurcated the conversion feature of their convertible notes and recorded a derivative liability on the date each note became convertible. The derivative liability was then revalued on each reporting date. The Company uses the Black-Scholes option-pricing model to value the derivative liability. There was no derivative liability at May 31, 2016. Once the loans are fully converted, the remaining derivative liability is reclassified to equity as additional paid-in capital.
ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with the above convertible debt. During the nine months ended May 31, 2016, the Company recorded a total change in the value of the derivative liabilities of $(346,125).
From inception to May 31, 2016 the Company has not granted any stock options.
8
CHERUBIM INTERESTS INC.
Notes to Consolidated Unaudited Condensed Financial Statements
May 31, 2016
NOTE 6 - STOCKHOLDERS' EQUITY
The total number of common shares authorized that may be issued by the Company is 5,000,000,000 shares with a par value of $0.0001 per share and 50,000,000 preferred shares.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has amounts due to related parties utilized to fund operations which carry varying interest rates. As of May 31, 2016 (August 31, 2015), the Company owed $639,108 ($995,698) of principal plus accrued interest of $202,387 ($532,454). The loans are unsecured and due on demand and as such are included in current liabilities. These amounts have been reduced by the conversion of debt into equity.
NOTE 9 – SUBSEQUENT EVENTS
On July 31, 2015, the Company issued a convertible promissory note to Auctus Fund LLC. in the amount of $45,750. On June 23, 2016, $64,934 of the principal and interest was converted into 865,792 common shares of the Company’s common stock.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management's plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" and the risks set out below, any of which may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
·
the uncertainty of profitability based upon our history of losses;
·
risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern;
·
risks related to our international operations and currency exchange fluctuations;
·
risks related to product liability claims;
·
other risks and uncertainties related to our business plan and business strategy.
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.
Forward looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", the "Company" and "Cherubim" mean Cherubim Interests Inc., unless otherwise indicated.
Our Current Business
Cherubim Interests Inc. ("Company") was organized September 27, 2006 under the laws of the State of Nevada for the purpose of selling new food products produced or developed by North American companies to foreign markets. On August 31, 2009, the Company discontinued its involvement in the sales of tea due to a strategic change in business focus by the acquisition of mineral rights as disclosed in the Company's 8-K filed with the SEC on September 2, 2009. The Company currently has limited operations or realized revenues from its planned principle business purpose and, in accordance with ASC 915, "Development Stage Entities", formerly known as SFAS 7, "Accounting and Reporting by Development State Enterprises." is considered a Development Stage Enterprise. The Company was incorporated in the State of Nevada, United States of America on September 27, 2006 and its fiscal year end is August 31. The Company was engaged in sales of new food products produced or developed by North American companies to foreign markets and discontinued that business in August 2009. The Company previously operated in the oil and gas industry, focused on the exploration for and development of oil and gas properties. Cherubim Interests now targets alternative, commercial, single and multifamily dwelling opportunities for the purpose of investment purchase. It also provides renovation services to third party multifamily dwelling unit owners on a turn-key basis. Cherubim Interests specializes in covering the entire spectrum of development – including due diligence, acquisition, planning, construction, renovation, and property management. This comprehensive expertise allows the company to provide complete beginning-to-end development programs for all acquisitions.
10
On October 14, 2015, the Board of Directors of Cherubim Interests, Inc. (the “Company”) approved the amendment and restatement of the Company’s Articles of Incorporation. The purpose of the Restatement was to:
i.
Increase the number of authorized shares of Common Stock to 5,000,000,000;
ii.
Increase the number of authorized shares of Preferred Stock to 50,000,000;
iii.
Set the par value of the Common and Preferred Stock to $0.00001;
iv.
Authorize the Board of Directors to issue “blank check” Preferred Stock and fix the rights, preferences, privileges, qualifications, limitations, and restrictions of any Preferred Stock issued by the Company, including the number of shares constituting any series or the designation of such series.
Also on October 14, 2015, the Board of the Company approved the amendment and restatement of the Certificates of Designation to the Articles of Incorporation of the Company’s Series A and B Preferred Stock (“the Preferred Classes”). The rights, preferences, privileges, restrictions and characteristics of the Preferred Classes are detailed in the Amended Certificate of Designation to the Articles of Incorporation filed hereto as exhibits 3(ii) and 3(iii) to this filing.
On October 14, 2015, the Company declared a dividend of 1 Series B Preferred share per 100,000 shares of common stock to the owners of record as of the close of business on December 31, 2015.
On December 2015, the Company entered into a debt settlement agreement with Gold Coast Capital LLC
On February 9, 2016, holders of a majority of the voting rights of the Company approved a 30,000 to 1 reverse split of the Company’s Common Stock (“Reverse Split”), meaning that each 30,000 shares of Common Stock will be consolidated into 1 share of Common Stock following the reverse split, provided however, that fractional shares would be rounded up to the nearest whole share. Notice of the action taken by holders of a majority of the voting rights of the Company was provided to non-consenting shareholders in accordance with Nevada law.
On February 29, 2016, Cherubim Interests, Inc., a Nevada corporation (the “Company”) entered into a share exchange agreement (the “SPA”), by and among the Company, Victura Construction Group Inc., Inc., a Wyoming corporation (“VICT”), and the shareholders of VICT, pursuant to which the Company purchased all of the outstanding equity interests of Victura Roofing LLC., and Cherubim Builders Group LLC. (Oklahoma) from Victura Construction Group Inc. in exchange for 60,000 shares of the Company’s Series C preferred stock, par value $0.00001 per share (the “Series C Preferred Stock”). Victura Roofing was a wholly owned partnership of Victura Construction Group Inc., and is led by industry professionals with a 20-year track record of success. Victura Roofing provides quality work for internal Victura subsidiaries Gregg Construction and WaterMasters Restoration as well as provides a platform for market business opportunities in the Dallas/Ft. Worth metroplex.
Cherubim Builders Group LLC (Oklahoma) is a general contractor that focuses on opportunities in restoration and reconstruction as well as multi-family and new home construction in the Oklahoma City area. Cherubim Builders Group LLC has not commenced operations.
RESULTS OF OPERATIONS
The following is a discussion and analysis of our results of operation for the nine month period ended May 31, 2016, and the factors that could affect our future financial condition. This discussion and analysis should be read in conjunction with our unaudited financial statements and the notes thereto included elsewhere in this quarterly report. Our financial statements are prepared in accordance with United States generally accepted accounting principles. All references to dollar amounts in this section are in United States dollars unless expressly stated otherwise.
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|
| Three months ended |
| Nine months ended | ||||||||
|
| May 31, 2016 |
| May 31 2015 |
| May 31, 2016 |
| May 31 2015 | ||||
Revenues |
| $ | 27,937 |
| $ | - |
| $ | 27,937 |
| $ | - |
Cost of Goods Sold |
|
| 19,975 |
|
| - |
|
| 19,975 |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation |
|
| 114,375 |
|
| - |
|
| 2,404,206 |
|
| - |
Professional fees |
|
| 3,381 |
|
| (289,480) |
|
| 21,081 |
|
| 32,756 |
Travel and promotion |
|
| 3,041 |
|
| 2 |
|
| 7,266 |
|
| 21,776 |
Bad debt |
|
| - |
|
| - |
|
| - |
|
| - |
Depreciation |
|
| 1,220 |
|
| - |
|
| 3,661 |
|
| - |
Other general and administrative |
|
| 12,870 |
|
| 282 |
|
| 48,456 |
|
| 14,845 |
Total operating expenses |
|
| 134,887 |
|
| 289,196 |
|
| 2,484,670 |
|
| 69,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/Loss from operations |
|
| (126,925) |
|
| (289,196) |
|
| 2,476,708 |
|
| 69,337 |
Revenue
Gross revenues for the three and nine month periods ended May 31, 2016, were $27,937 compared to $0 for the same periods in fiscal 2015.These gross revenues were generated from a subcontracting agreement with Golden Eagle Construction Inc.
Operating Expenses
The primary decrease in the operating expenses for the three months ended May 31, 2016 over the same period in fiscal 2015 was the decreased professional expenses. This was partially offset by the increase in other general and administrative expenses.
The primary increase in the operating expenses for the nine months ended May 31, 2016 over the same period in fiscal 2015 was the increase in other general and administrative expenses accrued and paid in shares. This was partially offset by the decreased professional expenses.
Liquidity and Capital Resource
Cash Flows
|
| Nine months ended | ||||
|
| May 31, 2016 |
| May 31, 2015 | ||
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Cash used in operating activities |
| $ | 36,307 |
| $ | (101,989) |
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
| (12,500) |
|
| 25,000 |
|
|
|
|
|
|
|
Cash provided by financing activities |
|
| 50,007 |
|
| 65,500 |
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| 73,814 |
|
| (11,489) |
|
|
|
|
|
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Cash beginning of period |
|
| 16,293 |
|
| 11,489 |
|
|
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Cash at end of period |
| $ | 90,107 |
| $ | - |
The Company had cash of $90,107; accounts payable and accrued liabilities of $799,196, notes payable totalling $100,273, related party notes totalling $658,057 a derivative liability of $86,168 and accrued interest of $571,796. We also had interest expense of $105,587 for the nine months ended May 31, 2016 and an accumulated Net Loss of (2,047,024) as of May 31, 2016.
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Cash Used In Operating Activities
The Company’s cash balance of 90,107 as of May 31, 2016, is increase of $73,814 during the nine months ended as compared to $16,293 at August 31, 2015.
Going Concern
The audited financial statements for the year ended August 31, 2015, included in our annual report on the Form 10-K filed with Securities and Exchange Commission, have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. The continuation of our Company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our Company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at May 31, 2016, our company has accumulated losses of $6,262,744 since inception. As we do not have sufficient funds for our planned operations, we will be required to raise additional funds for operations and expansion. Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended August 31, 2015, our independent registered auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent registered auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Future Financings
The company’s operating budget to maintain the public entity reporting requirements is approximately $50,000. We continue to present to various funding groups the current opportunities in attempts to secure additional capital.
We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock and/or preferred stock. However, we cannot provide investors with any assurance that we will be able to secure sufficient funding from the sale of our equity securities to fund our marketing plan and operations. At this time, we cannot provide investors with any assurance that we will be able to secure sufficient funding from the sale of our equity securities or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing and continue to be dependent upon related party/shareholder funding. The Company plans to secure additional capital by the use of Notes Payable, Convertible Notes Payable, Private Placements, and partnerships and revenue sharing in future opportunities. This financing activity may lead to stock dilution and changes in control
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4T. Controls and Procedures.
Evaluation of Disclosure Controls and Procedure
We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15 (e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure.
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The Company's Chief Executive Officer, who is its principal executive and chief financial officer, completed an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period (Feb 28, 2014) covered by this Form 10-Q. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company's Chief Executive Officer & CFO, has concluded the Company's disclosure controls and procedures, as of the end of the fiscal year covered by this Form 10-Q were ineffective because of comments from the SEC that required additional disclosure and restatement of other disclosed information.
Based upon the evaluation of our controls, the chief executive officer/CFO has concluded that, the disclosure controls and procedures are ineffective providing reasonable assurance that material information relating to the company activity is communicated in sufficient detail. Although, changes have been made to provide the level of detail that is required in the company filings based upon the SEC comments, the company is not prepared at this time to remove the ineffective status of the disclosure controls and procedures. The company will continue to work in these deficiencies.
Changes in Internal Control Over Financial Reporting.
There was no change in our internal control over financial reporting that occurred during the last fiscal quarter ended February 29, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS.
Risks and Uncertainties
THERE IS SUBSTANTIAL UNCERTAINTY AS TO WHETHER WE WILL CONTINUE OPERATIONS.
If we discontinue operations, you could lose your investment. Our auditors have discussed their uncertainty regarding our business operations in their audit report dated August 31, 2015. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such, we may have to cease operations and you could lose your entire investment.
WE LACK AN OPERATING HISTORY
There is no assurance that our future operations will result in continued profitable revenues. If we cannot generate sufficient revenues to operate profitably, our business will fail. We have very little operating history upon which an evaluation of our future success could be determined. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.
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OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS AND THE FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these l penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker- dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the National Association of Securities Dealers believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The National Association of Securities Dealers' requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock .
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS
Exhibit Number |
| Title of Document |
31.1 |
| Sec.302 Certification of CEO/CFO |
32.1 101 |
| Sec.906 Certification of CEO/CFO XBRL (extensible Business Reporting Language) |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cherubim Interests Inc.
/s/ Patrick Johnson
Patrick Johnson
CEO
November 3, 2016
/s/ Patrick Johnson
Patrick Johnson
CFO
November 3, 2016
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