UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended: September 30, 2017 | |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ____________ to _____________ |
Commission File No. 000-54820
| SICHUAN LEADERS PETROCHEMICAL COMPANY |
| (Exact name of small business issuer as specified in its charter) |
| FLORIDA | 20-4138848 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Tax. I.D. No.) |
| 3904 US Hwy 301 N Ellenton, FL 34222 |
| (Address of Principal Executive Offices) |
| (852) 67649599 |
| (Registrant’s Telephone Number, Including Area Code) |
| Quality Wallbeds, Inc. |
| (Registrant’s former name) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer” “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 | x |
| 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). Yes x No ¨
As of November 20, 2017, there were 43,425,000 shares of common stock outstanding.
TABLE OF CONTENTS
| Cautionary Note Regarding Forward-Looking Statements | i | |
| PART I - Financial Information | ||
| Item 1. | Financial Statements | 2 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 7 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 10 |
| Item 4. | Controls and Procedures | 10 |
| PART II – Other Information | ||
| Item 1. | Legal Proceedings | 11 |
| Item 1. A | Risk Factors | 11 |
| Item 2. | Unregistered Sales of Equity Securities And Use Of Proceeds | 11 |
| Item 3. | Defaults Upon Senior Securities | 11 |
| Item 4. | Mine Safety Disclosures | 11 |
| Item 5. | Other information | 11 |
| Item 6. | Exhibits | 12 |
| Signatures | 13 | |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). These forward-looking statements are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements.
We identify forward-looking statements by use of terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “hope,” “plan,” “believe,” “predict,” “envision,” “intend,” “will,” “continue,” “potential,” “should,” “confident,” “could” and similar words and expressions, although some forward-looking statements may be expressed differently. You should be aware that our actual results could differ materially from those contained in the forward-looking statements.
Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this report. These factors include, among others:
| ● | our ability to execute on our growth strategies; | |
| ● | our ability to find manufacturing partners on favorable terms; | |
| ● | declines in general economic conditions in the markets where we may compete; | |
| ● | our anticipated needs for working capital; and |
Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis.
Forward-looking statements speak only as of the date of this report or the date of any document incorporated by reference in this report. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
SICHUAN LEADERS PETROCHEMICAL COMPANY
BALANCE SHEETS
As of September 30, 2017 (unaudited) and December 31, 2016
| (All amounts shown in U.S. Dollars) | September 30, 2017 | December 31, 2016 | ||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and Cash Equivalents | $ | 15,314 | $ | 21,316 | ||||
| Prepaid Expenses | 236 | 5,112 | ||||||
| Total Current Assets | 15,550 | 26,428 | ||||||
| Total Assets: | 15,550 | 26,428 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable | 7,500 | 6,057 | ||||||
| Interest Payable | - | 16,700 | ||||||
| Convertible Note Payable, net of unamortized beneficial conversion feature | 5,851 | - | ||||||
| Total Current Liabilities | 13,351 | 22,757 | ||||||
| Total Liabilities | 13,351 | 22,757 | ||||||
| Stockholders’ Equity: | ||||||||
| Common Stock; $0.01 per share par value; 5,000,000,000 shares authorized; and 43,425,000 and 43,425,000 issued and outstanding at September 30, 2017 and December 31, 2016, respectively. | 434,250 | 434,250 | ||||||
| Additional Paid in Capital | 18,848,804 | 18,809,734 | ||||||
| Accumulated Deficit | (19,280,855 | ) | (19,240,313 | ) | ||||
| Total Stockholders’ Equity | 2,199 | 3,671 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 15,550 | $ | 26,428 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
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SICHUAN LEADERS PETROCHEMICAL COMPANY
STATEMENTS OF OPERATIONS
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2017 (unaudited) | 2016 (unaudited) | 2017 (unaudited) | 2016 (unaudited) | |||||||||||||
| Revenue: | $ | - | $ | - | $ | - | $ | - | ||||||||
| Operating Expenses: | ||||||||||||||||
| General and Administrative - Related Party | 10,489 | 17,968 | 4,500 | 5,989 | ||||||||||||
| General and Administrative | 24,206 | 23,767 | 14,946 | 7,120 | ||||||||||||
| Operations Loss | (34,695 | ) | (41,735 | ) | (19,446 | ) | (13,109 | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest Expense – Related Party | 4 | (7,350 | ) | - | (2,468 | ) | ||||||||||
| Interest Expense | (5,851 | ) | - | (4,970 | ) | - | ||||||||||
| Net Loss | (40,542 | ) | (49,085 | ) | (24,416 | ) | (15,577 | ) | ||||||||
| Basic and Diluted Net Loss per share: | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||
| Weighted average number of shares outstanding; Basic and Diluted | 43,425,000 | 30,755,000 | 43,425,000 | 30,755,000 | ||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
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SICHUAN LEADERS PETROCHEMICAL COMPANY
STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, | ||||||||
| Cash Flows from Operating Activities: | 2017 (unaudited) | 2016 (unaudited) | ||||||
| Net Loss | $ | (40,542 | ) | $ | (49,085 | ) | ||
| Adjustments to reconcile net loss to net cash used in provided by operations: | ||||||||
| Amortization of debt discount | 5,851 | - | ||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts Payable | 1,443 | 5,923 | ||||||
| Interest Payable | - | 7,350 | ||||||
| Prepaid Expenses | 4,876 | (3,800 | ) | |||||
| Net Cash Flows Used in Operating Activities: | (28,372 | ) | (39,612 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Convertible Note | 22,370 | - | ||||||
| Net Cash Provided by Financing Activities | 22,370 | - | ||||||
| Change in Cash and Cash Equivalents: | (6,002 | ) | (39,612 | ) | ||||
| Cash and Cash Equivalents, Beginning of Period | 21,316 | 68,381 | ||||||
| Cash and Cash Equivalents, End of Period | $ | 15,314 | $ | 28,769 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | - | - | ||||||
| Cash paid for taxes | - | - | ||||||
| NON-CASH FINANCING ACTIVITIES: | ||||||||
| Forgiveness of Accrued Interest by former Related Party | 16,700 | - | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
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Sichuan Leaders Petrochemical Company
Notes to Financial Statements
For the Nine Months Ended September 30, 2017 and 2016
(Unaudited)
NOTE 1. NATURE OF BUSINESS
Organization
Sichuan Leaders Petrochemical Company (“we,” “us,” “our” or the “Company”), formally known as Quality Wallbeds, Inc., was incorporated under the laws of the State of Florida on June 29, 2000. From our inception through May 2013, we have provided quality space saving custom home furniture and closet organizing systems to the general public. We offered our services to people and companies needing assistance in the organization of their living/work space. In May 2013, our Board of Directors (the “Board”) determined that to continue to protect and increase shareholder value, it would be to the advantage, welfare and best interests of our shareholders to consider alternative corporate strategies to generate new business revenue for the Company. The Board proposed that we pursue opportunities in Asia to acquire companies in the wholesale and resale of products in the automotive oil industry. To facilitate this action, the Board voted to dispose of all of our assets related to the retail operation of the wall bed products. This action was approved on May 21, 2013 by shareholders representing 87% of our issued and outstanding shares of common stock.
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had no ongoing business or other source of income and incurred a net loss of ($40,542) for the nine month period ended September 30, 2017. These factors raise substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the financial statements are issued.
The Company is currently evaluating acquisitions and other business opportunities. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. No assurance can be given that the Company will be successful in these efforts.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. In the opinion of management there have been no changes to the Company’s significant accounting policies, referred to in the audited financial statements and footnotes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed July 25, 2017. All Amounts referenced in these Financial Statements and this Report are in US Dollars unless otherwise stated.
In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of (a) the result of operations for the nine month period ended September 30, 2017 and 2016; (b) the financial position at September 30, 2017 and December 31, 2016; and (c) cash flows for the nine month period ended September 30, 2017 and 2016, have been made. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates. Operating results for the nine month period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.
Cash and Cash Equivalents
We consider cash equivalent with original maturities of 90 days or less to be cash equivalents.
Use of Estimates
The preparation of the financial statements in conformity with U.S. 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 expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.
Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain an embedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
Net Loss Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share.” Net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding for the period. At September 30, 2017 and 2016, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted loss per common share is the same as basic loss per common share for the period.
Financial Instruments and Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2017 and December 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments, approximate their fair values. These financial instruments include cash, accounts payable, and notes payable. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values.
The Company uses fair value measurements under the three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure for fair value measures. The three levels are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
| Fair Value Measurements Using Fair Value Hierarchy | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Convertible notes payable (net of unamortized BCF) – September 30, 2017 | $ | - | $ | - | $ | 5,851 | ||||||
Recently Issued or Adopted Standards
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
4
NOTE 4. COMMITMENTS AND CONTINGENCIES
Related Party
The controlling shareholders have pledged support to fund continuing operations, as necessary. From time to time, the Company is dependent upon the continued support of these parties, through temporary advances or through arrangements of their personal credit. However, there is no written commitment to this effect.
In addition to further assist the Company former Chief Executive Officer, Andy Fan has agreed to forgive the total amount of $16,700 in interest payable on the $110,000 note from February 10, 2015. The forgiveness of debt was recorded under additional paid in capital.
March 1, 2017 the Board of Directors agreed to cancel the management agreement with AF Ocean Investment Management Company (AF Ocean) effective April 1, 2017. For the nine months ended September 30, 2017 and 2016, management fee paid to AF Ocean were $10,489 and $17,968.
The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
The Company does not have employment contracts with its key employees, including the officers of the Company.
Leases And Facility
Our office is located at 3904 US Hwy 301 N Ellenton, FL 34222. We share the office with the Service Provider and ChinAmerica Andy Movie Entertainment Media Co. The service provider pays rent in the amount of $50 per month. However, the management agreement between the Company and the Service Provider AF Ocean was cancelled as of April 1, 2017.
Other Commitments
On May 31, 2017, the Company entered into a transactional agreement (the “Agreement”) with VentureVest Capital (VentureVest) in a consulting capacity to assist in bringing the Company’s delinquent filings current. VentureVest has offered to loan the Company an estimated amount of $22,370, and has agreed to accept promissory notes for each issuance of funds on the date the transfer of funds takes place. See below for details of all Promissory Notes issued to date. Furthermore, the Company has agreed that VentureVest will have the exclusive right to represent the Company and to locate a buyer for the common stock owned by Mr. Fan. Any and all contractual obligations of VentureVest under the Agreement have been terminated upon closing of the change of control transaction.
On May 31, 2017, VentureVest has agreed to accept the 1st convertible Promissory Note (“Promissory Note 1”) for the total amount of $6,000, the note is interest free until December 31, 2017, after which time it shall bear an interest rate of 6% per annum. The conversion rate is $0.05 per share.
On June 14, 2017, VentureVest has agreed to accept the 2nd convertible Promissory Note (“Promissory Note 2”) for the total amount of $8,690, the note is interest free until December 31, 2017, after which time it shall bear an interest rate of 6% per annum. The conversion rate is $0.05 per share.
On July 31, 2017, VentureVest has agreed to accept the 3rd convertible Promissory Note (“Promissory Note 3”) for the total amount of $7,680, the note is interest free until December 31, 2017, after which time it shall bear an interest rate of 6% per annum. The conversion rate is $0.05 per share.
These notes had beneficial conversion feature (“BCF”) of $22,370 and was recorded in the balance sheet at face value less the unamortized BCF.
At September 30, 2017, convertible notes payable consisted of the following:
| September 30, 2017 | ||||
| Convertible note payable | $ | 22,370 | ||
| Less: unamortized discount of BCF | (16,519 | ) | ||
| Convertible notes payable, net of BCF | $ | 5,851 | ||
NOTE 5. SUBSEQUENT EVENTS
On September 28, 2017, Andy Fan (the “Seller”) and Yap Nee Seng (the “Purchaser”) entered into a Stock Purchase Agreement (the “Agreement”). The closing of the transactions (the “Closing”) contemplated by the Agreement occurred and consummated on November 3, 2017. Pursuant to the Agreement, the Sellers sold to the Buyers, and the Buyers agreed to purchase from the Sellers, 40,000,020 shares of common stock, par value $0.01 per share (the “Common Stock”) of the Company, constituting approximately 92.1% of the issued and outstanding Common Stock (the “Change of Control”).
Effective October 31, 2017, Mr. Andy Fan resigned from the positions of Chief Executive Officer, Chief Financial Officer, President and Chairman of the Board he held with the Company and Tina Donnelly resigned from the corporate secretary position she held with the Company. Effective on October 31, 2017, the Company appointed Seng Nee Yap as Chief Executive Officer, President and Chairman of the Board of the Company and the Company appointed Yin Pei Cheah as Chief Financial Officer, Secretary and director of the Company.
On November 3, 2017, The Promissory Note 1, 2 and 3 due to VentureVest by the Company in total amount of $22,370 were paid in full of purchase price of the Closing and cancelled upon closing of the Change of Control transaction.
5
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed elsewhere in this report.
Overview
Sichuan Leaders Petrochemical Company (“we,” “us,” “our” or the “Company”) was incorporated in the State of Florida on June 29, 2000 under the name Quality Wallbeds, Inc. In December 2012, we changed our name in anticipation of new business opportunities. From our inception through May 2013, we provided quality space saving custom home furniture and closet organizing systems to the general public. We discontinued our wall bed operations on May 21, 2013.
We are exploring various opportunities, including the petrochemical field, to determine our best strategic business direction. Since the change in the business model, current management has seen a direct impact on our revenues. Future cash flows, if any, are impossible to predict at this time. We may raise cash from sources other than our operations. Our only other source for cash at this time is investments by others in the Company or our sole director and executive officer, Andy Fan. Any change in our strategic business direction may take years to complete and future cash flows, if any, are impossible to predict at this time.
Results of Operations
The following tables provide a comparison of a summary of our results of operations for the nine and three month period ended September 30, 2017 and 2016
Results of Operations for the Nine month period Ended September 30, 2017 and 2016.
| Nine Months Ended September 30, | ||||||||||||
| 2017 | 2016 | % Change | ||||||||||
| Revenue | $ | - | $ | - | 0 | % | ||||||
| General and Administrative Expense – Related Party | 10,489 | 17,968 | -50 | % | ||||||||
| General and Administrative Expense | 24,206 | 23,767 | 45 | % | ||||||||
| Loss from Operations | (34,695 | ) | (41,735 | ) | 47 | % | ||||||
| Other Income and (Expense) | ||||||||||||
| Interest Expense – Related Party | 4 | (7,350 | ) | 100 | % | |||||||
| Interest Expense | (5,851 | ) | - | 100 | % | |||||||
| Net Loss | $ | (40,542 | ) | $ | (49,085 | ) | 17 | % | ||||
Revenue from Operations
For the nine month period ended September 30, 2017 and September 30, 2016, total revenue was $0 as we have not commenced revenue generating operations following the discontinuance of our Florida wall bed operation in May 2013.
6
General and Administrative Expenses– Related Party
For the nine month period ended September 30, 2017 and September 30, 2016, related party operating expenses were $10,489 and $17,968, respectively. As of April 1, 2017 the contract with the Service Provider AF Ocean was cancelled.
General and Administrative Expenses
For the nine month period ended September 30, 2017 and September 30, 2016, general and administrative expenses were $34,695 and $23,767, respectively, which consist of those expenses related to the current operations of the Company. The increase in expenses between the two periods relates directly to the lawyers review fees from the periodic filings with the SEC.
Net Income (Loss)
As a result of the factors described above, there was a net loss of ($40,542) and ($49,085) for the nine month period ended September 30, 2017 and 2016, respectively.
Results of Operations for the Three month period Ended September 30, 2017 and 2016.
| Three Months Ended September 30, | ||||||||||||
| 2017 | 2016 | % Change | ||||||||||
| Revenue | $ | - | $ | - | 0 | % | ||||||
| General and Administrative Expense – Related Party | 4,500 | 5,989 | 100 | % | ||||||||
| General and Administrative Expense | 14,946 | 7,120 | 56 | % | ||||||||
| Loss from Operations | (19,446 | ) | (13,109 | ) | 42 | % | ||||||
| Other Income and (Expense) | ||||||||||||
| Interest Expense – Related Party | - | (2,468 | ) | 100 | % | |||||||
| Interest Expense | (4,970 | ) | - | 100 | % | |||||||
| Net Loss | $ | (24,416 | ) | $ | (15,577 | ) | 57 | % | ||||
Revenue from Operations
For the three month period ended September 30, 2017 and September 30, 2016, total revenue was $0 as we have not commenced revenue generating operations following the discontinuance of our Florida wall bed operation in May 2013.
General and Administrative Expenses– Related Party
For the three month period ended September 30, 2017 and September 30, 2016, the related party operating expenses were $4,500 and $5,989, respectively.
General and Administrative Expenses
For the three month period ended September 30, 2017 and September 30, 2016, general and administrative expenses were $14,946 and $7,120, respectively. The increase directly relates to the audit fees and lawyer fees for the Company.
Net Income (Loss)
As a result of the factors described above, there was a net loss of ($24,416) and ($15,577) for the three month period ended September 30, 2017 and 2016, respectively.
Liquidity and Capital Resources
General.
At September 30, 2017, we had cash and cash equivalents of $15,314. We have historically met our cash needs through cash flows from operating activities. However, since the discontinuation of our Florida wall bed operation the controlling shareholders have continued to fund the Company’s operating expenses through shareholder loans as necessary. Our cash requirements are generally for general and administrative activities, including all expenses related to periodic filings with the SEC. We have raised capital through officer loans during the previous fiscal year. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements and therefore we will require additional funding through officer loans.
In the event we are unable to generate sufficient funds to continue our business efforts or if we are pursued by a larger company for a business combination, we will analyze all strategies to continue the Company and maintain or increase shareholder value. Under these circumstances, we would consider a merger, acquisition, joint venture, strategic alliance, a roll-up, or other business combination for the purposes of continuing the business and maintaining or increasing shareholder value. Management believes its responsibility to maintain shareholder value is of paramount importance, which means we should consider the aforementioned alternatives in the event funding is not available on favorable terms to us when needed.
7
Operating activities
Our continuing operating activities used cash of ($28,372) and ($39,612) for the nine month period ended nine 30, 2017 and 2016, respectively.
Investing Activities
We neither generated nor used funds in continuing investing activities during the nine month period ended month period ended nine 30, 2017 or 2016.
Financing activities
Cash provided in our financing activities was $22,370 for the nine month period ended September 30, 2017, consisting of the $22,370 which is the total promissory notes given to VentureVest Capital, compared to cash of $0 during the comparable period in 2016.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We had no ongoing business or other source of income and incurred a net loss of ($40,542) for the nine month period ended September 30, 2017. Due to the Company’s limited liquid resources, recurring losses from operations and the Company’s need to raise additional capital, all raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
We are currently evaluating acquisitions and other business opportunities. The ability to continue as a going concern is dependent upon us generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. No assurance can be given that we will be successful in these efforts.
Inflation
Inflation does not materially affect our business or the results of our operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies
We prepare our financial statements in accordance with generally accepted accounting principles of the United States (“GAAP”). GAAP represents a comprehensive set of accounting and disclosure rules and requirements. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. Our actual results could differ from those estimates. We use historical data to assist in the forecast of our future results. Deviations from our projections are addressed when our financials are reviewed on a monthly basis. This allows us to be proactive in our approach to managing our business. It also allows us to rely on proven data rather than having to make assumptions regarding our estimates.
Recent Accounting Pronouncements
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company financial statements.
8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item pursuant to Item 305 of Regulation S-K.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
With respect to the period ending September 30, 2017, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934.
Based upon our evaluation regarding the period ending September 30, 2017, the Company’s management, including its Principal Executive Officer, has concluded that its disclosure controls and procedures were not effective due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Material weaknesses noted are lack of an audit committee, lack of a majority of outside directors on the board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and management is dominated by two individuals, without adequate compensating controls. However, management believes the financial statements and other information presented herewith are materially correct.
The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, the Company’s management, including its Principal Executive Officer, does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We were not subject to any legal proceedings during the nine months ended September 30, 2017, nor to the best of our knowledge and belief are any threatened or pending.
ITEM 1A. RISK FACTORS
We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not sell any unregistered equity securities during the nine months ended September 30, 2017.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No senior securities were issued and outstanding during the nine months ended September 30, 2017.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
| * | Incorporated herein by reference to Sichuan Leaders Petrochemical Company’s Registration Statement on Form S-1 filed with the SEC on August 7, 2012. |
| ** | Incorporated herein by reference to Sichuan Leaders Petrochemical Company’s Current Report on Form 8- K filed with the SEC on December 21, 2012. |
| *** | Incorporated herein by reference to Sichuan Leaders Petrochemical Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2016. |
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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.
| SICHUAN LEADERS PETROCHEMICAL COMPANY | ||
| Dated November 20, 2017 | By: | /s/ Yin Pei Cheah |
| Yin Pei Cheah | ||
| Principal Financial Officer | ||
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