SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-55309
USA CAPITAL MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
| Puerto Rico | 47-2128828 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
404 Ave Constitución # 208
San Juan, Puerto Rico 00901-2251
(Address of principal executive offices) (zip code)
(Registrant's telephone number, including area code): 787-900-5048
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
| Common Stock, $.0001 par value per share |
| (Title of class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:
¨ Yesx No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:
¨ Yesx No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Yesx No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.404 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
Yesx No¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yesx No¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated Filer | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | x |
| (do not check if a smaller reporting company) | |||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes¨ Nox
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:
$ 0
Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date.
| Class | Outstanding at March 15, 2017 | |||
| Common Stock, par value $0.0001 | 3,000,000 | |||
| Documents incorporated by reference: | None | |||
PART I
Item 1. BUSINESS
USA Capital Management, Inc. ("USA Capital" or "the Company" formally Oak Valley Acquisition Corp) was incorporated on September 25, 2014 under the laws of the state of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company was originally formed to provide a method for a foreign or domestic private company to become reporting company with a class of securities registered under the Securities Exchange Act of 1934. On September 25, 2014 the Company issued 20,000,000 shares to its two founders and directors. The Company registered its common stock on Form a 10 registration statement filed pursuant to the Securities Exchange Act of 1934 (“the Exchange Act”) and Rule 12(g) thereof.
The Company effected a change in control on May 5, 2015 with the redemption and cancellation of the 20,000,000 shares of outstanding common stock, the resignation of the then officers and directors and the election of Richard Meruelo as President, Secretary and Chief Financial Officer. Richard Meruelo was named the director of the company. On May 6, 2015, the Company issued 3,000,000 shares of its common stock pursuant to Section 4(2) of the Securities Act of 1933 to Richard Meruelo.
In May 2015, the Company converted from a Delaware to a Puerto Rico corporation and moved its principal place of business to San Juan, Puerto Rico.
In June 2016, the Company was granted tax benefits by the government of Puerto Rico under the provisions of ACT 20-2012. Under the Act, the Company will benefit from significant tax advantages, including a 4% tax on taxable income.
In 2016, the Company had three employees and one officer, director and shareholder (two employees in 2015).
Item 2. PROPERTIES
There was one property purchased in 2016 and three in 2015. In August, 2016, the Company purchased a parcel of land for $252,029 that is adjacent to the parcels previously acquired and complements the previous acquisitions. It was paid in full largely with the $250,000 deposit the Company had in escrow. In 2015, the Company purchased property that is being utilized as office space and two additional parcels of land that it intends to develop. Those purchases were paid in the form of seller financing and cash from additional paid in capital from its sole shareholder. The 2015 purchases totaled $1,535,000.
These development acquisitions were purchased under Rebuild San Juan-Puerta de Tierra, LLC and Rebuild San Juan-Puerta de Tierra II, LLC, respectively. These are single member LLC’s with USA Capital Management, Inc. as its only member.
Item 3. LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against the Company.
Item 4. MINE SAFETY DISCLOSURES
Not applicable
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
There is currently no public market for the Company’s securities.
The Company has not yet elected to cause the Company’s stock to trade in one or more United States securities markets.
At such a time as it decides, the Company may choose to apply for quotation of its securities on the OTC Bulletin Board.
The OTC Bulletin Board is a dealer-driven quotation service. Unlike the Nasdaq Stock Market, companies cannot directly apply to be quoted on the OTC Bulletin Board, only market makers can initiate quotes, and quoted companies do not have to meet quantitative financial requirements. Any equity security of a reporting company not listed on the NASDAQ Stock Market or on a national securities exchange is eligible.
As such time as it qualifies, the Company may choose to apply for quotation of its securities on the Nasdaq Capital Market.
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In general, there is greatest liquidity for traded securities on the Nasdaq Capital Market and less on the OTC Bulletin Board. It is not possible to predict where, if at all, the securities of the Company will be traded.
Since inception, the Company has sold securities which were not registered as follows:
| DATE | NAME | NUMBER OF | CONSIDERATION | |||||||
| SHARES | ||||||||||
| September 25, 2014 | James Cassidy | 10,000,000 | (1) | $ | 1,000 | |||||
| September 25, 2014 | James McKillop | 10,000,000 | (1) | $ | 1,000 | |||||
| May 6, 2015 | Richard Meruelo | 3,000,000 | $ | 300 | ||||||
| (1) | Shares redeemed and cancelled on May 5, 2015 |
The Company declared cash dividends for approximately $.06 per share and $.19 in December, 2016 and December, 2015, respectively. The Company expects that comparable cash dividends will be paid in the future.
Item 6. Selected Financial Data
There is no selected financial data required to be filed for a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
On May 5, 2015, the following events occurred:
1] The Company redeemed and cancelled an aggregate of 20,000,000 of the then 20,000,000 shares of outstanding stock at redemption price of $.001 per share and cancelled such shares. The then current officers and directors resigned.
2] Richard Meruelo was named President, Secretary, and Chief Financial Officer of the Company.
3] Richard Meruelo was named Director of the Company.
On May 6, 2015, the Company changed its name from Oak Valley Acquisition Corp to USA Capital Management, Inc. and effected a change in control. The Company issued 3,000,000 shares of common stock at par (representing 100% of the total outstanding 3,000,000 shares of outstanding stock) to Richard Meruelo, the sole officer and director of the Company.
The Company expects to manage Limited Liability Company’s (LLC’s) that are formed to promote, invest and operate business opportunities globally.
The Company qualified for tax benefits provided by Act 20 in Puerto Rico in June, 2016. Act 20 provides tax incentives to local companies exporting services from Puerto Rico to other jurisdictions in and outside of the United States. It allows for a reduced 4% income tax rate and a 60% municipal license tax exemption for a 20 year period together with the total income tax exemption on dividends. Advisory services on matters relating to any trade or business; investment banking and other financial services; advertising and public relations; economic, environmental, technological scientific, management, marketing, human resources, information and audit consulting, professional services, development of computer programs and research are among services that qualify for Act 20 tax benefits.
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Results of Operations for the twelve months ended December 31, 2016 and December 31, 2015.
The Company had net income of $1,664,388 and $408,391 for the twelve months ended December 31, 2016 and December 31, 2015, respectively. The Company generated consulting fee revenues of $2,000,000 in 2016 and $600,000 in 2015. Revenue increases were a result of a full year of fees in 2016 versus approximately six months of fee generation in 2015, along with an addition to its customer base.
Similarly, increases in expenses over last year were a result of twelve months of operation expenses in 2016 and only six months of operation expenses in 2015. Additionally, administrative cost such as salaries, audit and review costs, and municipal taxes incremented over the prior year. The resulting net income increase over last year accounted for the approximately $54,544 of additional income taxes at December 31, 2016.
Liquidity and Capital Resources
Operating activities provided cash of $1,556,078 for the twelve months ended December 31, 2016 and $324,316 for December 31, 2015. The company continues to fund its operations from fees generated. Any additional capital expenditures will be provided through capital contributions by its sole stockholder.
Investing activities used for the twelve months ended December 31, 2016 and December 31, 2015 were $34,630 and $102,248, respectively. These are capitalized legal cost incurred in the negotiation and pursuit of other developmental properties. Such costs are expected to decrease over the coming year.
During the twelve month period ended December 31, 2016, the Company used $220,527 from its financing activities to purchase the sole parcel of land it acquired (the funds were provided from its sole shareholder). The December 31, 2015 results from financing activities was $371,543 that were also used for purchases of land.
For the years ended December 31, 2016 and December 31, 2015, the Company had working capital (deficit) of $(240,178) and $115,665. In December, 2016, the Company paid dividends of $1,776,000.
Item 8. Financial Statements and Supplementary Data
The financial statements for the year ended December 31, 2016 are attached hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no change in or disagreements with accountants on accounting and financial disclosure for the period covered by this report.
Item 9A. Control & Procedures
Pursuant to Rules adopted by the Securities and Exchange Commission, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rules. This evaluation was done as of the end of the fiscal year by the principal executive officer (who is also the principal financial officer). There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation. Based upon that evaluation, he believes that the Company’s disclosures controls and procedures are not effective in gathering, analyzing and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, summarized and processed timely. The principal executive officer is directly involved in the day-to day operations of the company.
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Management’s Report of Internal Control over Financial Reporting
The Company is responsible for establishing and maintaining adequate internal control over financial reporting in accordance with the Rule 13a-15 of the Securities Exchange Act of 1934. The Company’s officer and its president, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016, based on the criteria establish in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2016, based on those criteria. A control system can provide only reasonably, not absolute, assurance that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues have been detected.
Anton & Chia, LLP, the independent registered public accounting firm for USA Capital Management, Inc., has not issued an attestation report on the effectiveness of the Company’s internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting during its fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Item 9B. Other Information
Not applicable
PART III
Item 10. Directors, Executive Officer, and Corporate Governance
The Directors and Officers of the Company are as follows:
| Name | Age | Positions and Offices Held | ||
| Richard Meruelo | 54 | President, Secretary, CFO, Director |
There are no agreements or understandings for the officer or director to resign at the request of another person and the above-named officer and director is not acting on behalf of nor will act at the direction of any other person.
Richard Meruelo serves as the Chief Executive Officer, Secretary, Chief Financial Officer and Director of the Company (since May 5, 2016). From 2011 to the present, Mr. Meruelo has served as the manager of Rebuild Miami, LLC. From 2000 to 2011, Mr. Meruelo was chairman and CEO of Meruelo Maddux Properties, Inc. Mr. Meruelo received his Bachelor of Arts Degree from the University of Southern California in 1986.
Code of Ethics
The Company has not at this time adopted a code of Ethics pursuant to rules described in Regulation S-K. The company has only one person who is the only shareholder, director and officer. The adoption of an Ethical Code at this time would not serve the primary purpose of such a code to provide a manner of conduct as the development, execution and enforcement of such a code would be by the same persons and only persons to whom such code applied.
The Company does not maintain an Internet website on which to post a code of ethics.
Corporate Governance
For reasons similar to those described above the Company does not have a nominating nor audit committee of the board of directors. At this time, the Company consists of one shareholder who serves as the corporate director and officers. At such a time as the Company has additional shareholders, the Company will propose creating committees of its board of directors, including both a nominating and an audit committee.
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Item 11. Executive Compensation
The Company’s sole officer and director received compensation for services rendered to the company of $16,300 and $4,000 for the fiscal years ended December 31, 2016 and December 31, 2015. Executive compensation is summarized as follows:
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock/Option Awards | Non-Equity Incentive Plan Compensation | All Other Compensation | Total Compensation | |||||||||||||||||||
| Richard Meruelo CEO / CFO | 2016 | $ | 16,300 | - | - | - | - | $ | 16,300 | |||||||||||||||||
No retirement, pension, profit sharing, stock option or issuance programs or other similar programs have been adopted by the Company for the benefit of its employees.
The Company does not have a compensation committee for the same reasons as described above.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of December 31, 2016, each person known by the Company to be the beneficial owner of five percent or more of the Company’s common stock and the director and officer of the Company.
The Company does not have a compensation plans and has not authorized any securities for future issuance. Except as noted, the holder of thereof has sole voting and investment power with respect to the shares shown.
| Name and Address of | Amount of | |||||||||
| Title of Class | of Beneficial Owner | Beneficial Ownership | Percent of Stock | |||||||
| Common | Richard Meruelo | |||||||||
| 404 Ave Constitucion #208 | ||||||||||
| San Juan, Puerto Rico 00901 | 3,000,000 | 100 | % | |||||||
Item 13. Certain Relationships and Related Transactions and Director Independence
USA Capital Management, Inc. is not currently required to maintain an independent director as defined by Rule 4200 of the Nasdaq Capital Market nor does it anticipate that it will be applying for listing of its securities on an exchange in which an independent directorship is required.
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Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees incurred for each of the last two years for professional services rendered by the independent registered public accounting firm for the audits of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-K and Form 10-Q reports and services normally provided in connection with statutory and regulatory filings or engagements were as follows:
| December 31, 2016 | December 31, 2015 | |||||
| $ | 30,025 | $ | 15,125 | |||
Audit-Related Fees
The Company does not currently have an audit committee serving and as a result its director performs the duties of an audit committee. The director will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. The Company does not rely on pre-approval policies and procedures.
PART IV
Item 15. Exhibits, Financial Statement Schedules
There are no financial statements schedules nor exhibits filed herewith. The exhibits filed in earlier reports and the Company’s Form 10 are incorporated herein by reference.
31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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AUDITED FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm | 9 |
| Consolidated Financial Statements | 10-13 |
| Notes to Consolidated Financial Statements | 14-17 |
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To the Board of Directors and Stockholders
USA Capital Management, Inc.
404 Ave. Constitucion #208
San Juan, Puerto Rico 00901-2237
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of USA Capital Management, Inc. (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company, at December 31, 2016 and 2015, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Newport Beach, California
March 27, 2017
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Consolidated Balance Sheets
| December 31, 2016 | December 31, 2015 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 118,532 | $ | 593,611 | ||||
| Deposits | 1,003 | 261,003 | ||||||
| Total Current Assets | 119,535 | 854,614 | ||||||
| Property and Equipment: | ||||||||
| Capitalized costs | 136,879 | 102,248 | ||||||
| Land | 1,529,455 | 1,267,115 | ||||||
| Building, Improvements and Equipment | 275,000 | 275,000 | ||||||
| Less: Accumulated Depreciation | (17,500 | ) | (7,500 | ) | ||||
| Property and Equipment, net of accumulated depreciation | 1,923,834 | 1,636,863 | ||||||
| Escrow costs | 25,451 | 25,451 | ||||||
| Less: Accumulated Amortization | (1,405 | ) | (479 | ) | ||||
| Escrow Costs, net of accumulated amortization | 24,046 | 24,972 | ||||||
| TOTAL ASSETS | $ | 2,067,415 | $ | 2,516,449 | ||||
| LIABILITIES and STOCKHOLDERS' EQUITY | ||||||||
| LIABILITIES | ||||||||
| Accounts Payable and Accrued Expenses | $ | 359,713 | $ | 738,949 | ||||
| Total Current Liabilities | 359,713 | 738,949 | ||||||
| Note Payable | 750,000 | 750,000 | ||||||
| TOTAL LIABILITIES | 1,109,713 | 1,488,949 | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Stockholders' Equity: | ||||||||
| Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of December 31, 2016 and December 31, 2015, respectively. | - | - | ||||||
| Common Stock, $0.0001 par value, 100,000,000 shares authorized; 3,000,000 and 20,000,000 shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively | 300 | 300 | ||||||
| Discount on Common stock | (300 | ) | (300 | ) | ||||
| Additional Paid in Capital | 1,231,634 | 1,189,821 | ||||||
| Accumulated Deficit | (273,932 | ) | (162,321 | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | 957,702 | 1,027,500 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,067,415 | $ | 2,516,449 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
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USA Capital Management, Inc
Consolidated Statements of Operations
For the Year Ended December 31, 2016 | For the Year Ended December 31, 2015 | |||||||
| Consulting Fees | $ | 2,000,000 | $ | 600,000 | ||||
| Expenses: | ||||||||
| Salaries & Wages | $ | 64,433 | $ | 7,000 | ||||
| Payroll Taxes | 5,610 | 669 | ||||||
| Payroll Processing fees | 630 | 25 | ||||||
| Homeowners Association fees | - | 501 | ||||||
| Property/Liability insurance | 2,037 | 1,472 | ||||||
| Utilities | 7,717 | 5,463 | ||||||
| Property Taxes | 15,289 | 12,668 | ||||||
| Other Tax & Licenses | 7,782 | - | ||||||
| Municipal and State taxes | 153 | - | ||||||
| Legal and Professional fees | 69,572 | 104,953 | ||||||
| Review and Audit fees | 30,025 | 15,125 | ||||||
| Depreciation and Amortization | 10,926 | 7,979 | ||||||
| Office Supplies | 997 | - | ||||||
| Cost of Terminated Deals | 10,000 | - | ||||||
| Bank Charges | 756 | 196 | ||||||
| Total Expenses | $ | 225,927 | $ | 156,051 | ||||
| Other Expenses: | ||||||||
| Interest Expense | 38,125 | 18,542 | ||||||
| Total Other Expenses | 38,125 | 18,542 | ||||||
| Net Income before income taxes | $ | 1,735,948 | $ | 425,407 | ||||
| Income taxes | 71,560 | 17,016 | ||||||
| Net Income | $ | 1,664,388 | $ | 408,391 | ||||
| Earnings Per Share - basic and diluted | $ | 0.55 | $ | 0.05 | ||||
| Weighted average shares-basic and diluted | 3,000,000 | 8,821,917 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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USA Capital Management, Inc
Consolidated Statement of Changes in Stockholders' Equity
For the Year ended December 31, 2016 and for the period from December 31, 2014
| Common Stock | Discount on Common | Additional Paid | Accumulated | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Stock | in Capital | Deficit | Equity | |||||||||||||||||||
| Balance as of December 31, 2014 | 20,000,000 | $ | 2,000 | $ | (2,000 | ) | $ | 712 | $ | (712 | ) | $ | - | |||||||||||
| Cancellation of common stock | (20,000,000 | ) | $ | (2,000 | ) | $ | 2,000 | - | - | - | ||||||||||||||
| Issuance of common stock | 3,000,000 | $ | 300 | $ | (300 | ) | - | - | - | |||||||||||||||
| Additional paid in capital | - | - | - | $ | 1,189,109 | - | 1,189,109 | |||||||||||||||||
| Net income | - | - | - | - | 408,391 | 408,391 | ||||||||||||||||||
| Dividends | - | - | - | - | (570,000 | ) | (570,000 | ) | ||||||||||||||||
| Balance as of December 31, 2015 | 3,000,000 | $ | 300 | $ | (300 | ) | $ | 1,189,821 | $ | (162,321 | ) | $ | 1,027,500 | |||||||||||
| Additional paid in capital | - | - | - | 41,814 | - | 41,814 | ||||||||||||||||||
| Net Income | - | - | - | - | 1,664,388 | 1,664,388 | ||||||||||||||||||
| Dividends | - | - | - | - | (1,776,000 | ) | (1,776,000 | ) | ||||||||||||||||
| Balance as of December 31, 2016 | 3,000,000 | $ | 300 | $ | (300 | ) | $ | 1,231,635 | $ | (273,933 | ) | $ | 957,702 | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 12 |
USA Capital Management, Inc.
Consolidated Statement of Cash Flows
| For the Year Ended December 31, 2016 | For the Year Ended December 31, 2015 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net Income | $ | 1,664,388 | $ | 408,391 | ||||
| Non-cash adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 10,926 | 7,979 | ||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| (Increase) Decrease in deposits | 260,000 | (261,003 | ) | |||||
| Increase (Decrease) in accounts payable and accrued expenses | (379,236 | ) | 168,949 | |||||
| Total adjustments to reconcile net income to net cash | (108,310 | ) | (84,075 | ) | ||||
| Net cash provided by operating activities | $ | 1,556,078 | $ | 324,316 | ||||
| INVESTING ACTIVITIES | ||||||||
| Increase in capitalized costs | (34,630 | ) | (102,248 | ) | ||||
| Net cash used for investing activities | $ | (34,630 | ) | $ | (102,248 | ) | ||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of stockholders contribution to purchase land | (220,527 | ) | 371,543 | |||||
| Dividends | (1,776,000 | ) | - | |||||
| Net cash (used for)provided by financing activities | $ | (1,996,527 | ) | $ | 371,543 | |||
| Net increase (decrease) in cash | (475,079 | ) | 593,611 | |||||
| Cash, beginning of year | 593,611 | - | ||||||
| Cash, end of year | $ | 118,532 | $ | 593,611 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Income tax paid | $ | 20,000 | $ | - | ||||
| Non-cash transaction: | ||||||||
| Dividends | $ | - | $ | 570,000 | ||||
| Purchase of fixed assets from related party | $ | 262,340 | $ | 2,317,566 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
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NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
USA Capital Management, Inc. ("USA Capital" or "the Company") was incorporated on September 25, 2014 under the laws of the state of Delaware to engage in any lawful corporate undertaking. In May 2015, the Company converted from a Delaware to a Puerto Rico corporation and moved its principal place of business to San Juan, Puerto Rico. The Company’s operations are mostly dedicated to its management consulting as it continues to focus on expanding its customer base. The properties are designated for development as the Company is working to complete its development plan and obtain financing. The Company qualified for a tax decree under ACT 20-2012 in Puerto Rico. The Company will benefit from significant income tax advantages, including a 4% tax on taxable income. The Company will continue to pursue other fee generating management contracts which may include carried interest, outside of Puerto Rico. USA Capital Management, Inc. intends to provide management services to Limited Liability Companies that are formed to promote, invest and operate businesses.
The Company has three employees and one officer, director and shareholder.
BASIS OF PRESENTATION
The summary of significant accounting policies presented below is designed to assist in understanding the Company's audited financial statements. Such consolidated financial statements and accompanying notes are the representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements.
PRINCIPLES OF CONSOLIDATION
Consolidation is the process by which the financial statements of a parent company are combined with those of its subsidiaries, as if they were a single entity. All of the companies over which the Company has a direct or indirect power to determine financial and operating policies are included as part of these consolidated financial statements. All intercompany balances and transactions, if any, have been eliminated.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with 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 periods. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue recognition is based on accrual accounting in accordance with GAAP and is recognized when earned. Management fees are based on a percentage of the value of the managed project.
CASH
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less. The Company had $118,532 and $593,611 of cash or cash equivalents as of December 31, 2016 and December 31, 2015, respectively.
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CONCENTRATION OF RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did have cash balances in excess of the Federal Deposit Insurance Corporation limit as of December 31, 2016.
PROPERTY AND EQUIPMENT
Property and Equipment, including land, building, improvements and capitalized costs are stated at cost, less accumulated depreciation. We have determined the useful life of the buildings and improvements to be 27.5 years. Costs related to the acquisitions or future acquisitions have been capitalized, while expenses for repairs and maintenance are charged to operations as incurred.
INCOME TAXES
Under ASC 740, "Income Taxes," deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing 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 recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2016 there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
The Company has qualified in Puerto Rico under Act 20-2012, which among other benefits, is taxed at a rate of 4% of taxable income.
EARNINGS PER COMMON SHARE
Basic earnings per common share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. As of December 31, 2016, there were no outstanding dilutive securities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements (audited) on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial statements (audited) on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability.
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The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity of these instruments.
NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
On October 26, 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2016-17-Consolidation Topic 810): Interest Held through Related Parties That Are under Common Control. The amendments in this Update cover a wide range of Topics in the Codification. The amendments in this Update represent changes to the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. Transition guidance varies based on the amendments in this Update. The amendments in this Update that require transition guidance are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted, including adoption in an interim period. All other amendments will be effective upon the issuance of this Update. Management is in the process of assessing the impact of this ASU on the Company's financial statements.
NOTE 3 - STOCKHOLDERS' EQUITY
The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 shares of preferred stock, 3,000,000 shares of common stock and no preferred stock were issued and outstanding as of December 31, 2016 and December 31, 2015.
The Company effected a change in control on May 5, 2015 with the redemption and cancellation of 20,000,000 shares of outstanding common stock, the resignation of the then officers and directors and the election of Richard Meruelo as President, Secretary and Chief Financial Officer. Richard Meruelo was named director of the Company.
On May 6, 2015, USA Capital issued 3,000,000 shares of its common stock pursuant to Section 4(2) of the Securities Act of 1933 at par representing 100% of the total outstanding 3,000,000 shares of common stock as follows:
| Richard Meruelo | 3,000,000 |
NOTE 4 – PROPERTY PLANT AND EQUIPMENT
The Company has purchased the following through December 31, 2015 and December 31, 2016:
| Description | Purchase Date | Purchase Amount | ||||
| Building | 04/01/15 | $ | 275,000 | |||
| Land | 07/09/15 | $ | 1,000,000 | |||
| Land | 07/29/15 | $ | 260,000 | |||
| Land | 08/31/16 | $ | 262,340 | |||
These purchases were funded by paid in capital by its sole shareholder and were purchased under Rebuild San Juan-Puerta de Tierra, LLC and Rebuild San Juan-Puerta de Tierra II, LLC. These are single member LLC’s with USA Capital Management, Inc as its only member.
Additionally, the Company has capitalized legal costs of future purchases in the amount of $136,879.
In August 2016, USA Capital Management, Inc. closed on the purchase of a property for $262,340. This property is adjacent to the other acquisitions and is part of the Company’s comprehensive development plan. The $262,340 was contributed from the Company’s President, Richard Meruelo, as additional paid-in capital.
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NOTE 5 – NOTE PAYABLE
In the negotiation for the closing of the $1,000,000 land purchase, the seller, as an inducement to close escrow quickly, accepted a note for $750,000 at 5% per annum, with interest accruing yearly. The note, which commenced on July 8, 2015, is for 36 months (due and payable on July 8, 2018).
NOTE 6 – RELATED PARTY TRANSACTIONS
The land acquisitions were purchased under Rebuild San Juan-Puerta De Tierra, LLC and Rebuild San Juan-Puerta De Tierra II, LLC, single member LLC’s incorporated in Puerto Rico. USA Capital acquired the LLC’s by its capital contributions of $250,000 and $260,000 respectively and are subsidiaries of the Company.
The purchase cost for the acquisition were as follows:
| Rebuild San Juan-Puerta De Tierra, LLC | $1,007,115 (for Land) |
| Rebuild San Juan-Puerta De Tierra II, LLC | $ 522,340 (for Land) |
The management fees generated of $2,000,000 and $600,000 for the years ended December 31, 2016 and
December 31, 2015 were with entities affiliated/related to the sole shareholder of USA Capital Management, Inc.
NOTE 7 – SUBSEQUENT EVENTS
In March, 2017, one of the managed properties of the Company was sold, realizing USA Capital with a fee income on that sale of $12,600,000. Additionally, a deposit of $1,000,000 was made for a parcel of land in March, 2017.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| USA CAPITAL MANAGEMENT, INC. | ||
| By: | /s/ Richard Meruelo | |
| President, Chief Financial Officer | ||
Dated: March 27, 2017
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