10-Q

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 March 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 333-181742

SECTOR 5, INC.

(Exact name of registrant as specified in its charter)

Nevada	45-5042353
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2000 Duke Street, Suite 110

Alexandria, Virginia 22314

(Address of principal executive offices)

(571) 348-1005

(Issuer's telephone number, including area code)

_____________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 website, 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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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 ¨ No x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Class	Outstanding at May 12, 2016
Common Stock, par value $.001 per share	20,000,00 shares

SECTOR 5, INC.

TABLE OF CONTENTS

		PAGE
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)		3
	Balance Sheets		3
	Statements of Operations		4
	Statements of Cash Flows		5
	Notes to Financial Statements		6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		16
Item 4.	Controls and Procedures		16
PART II OTHER INFORMATION
Item 1.	Legal Proceedings		19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3.	Defaults Upon Senior Securities		19
Item 4.	Mine Safety Disclosures		19
Item 5.	Other Information		19
Item 6.	Exhibits		20
Signatures			23
EX-31.1
EX-32.1
101 INSTANCE DOCUMENT
101 SCHEMA DOCUMENT
101 CALCULATION LINKBASE DOCUMENT
101 LABELS LINKBASE DOCUMENT
101 PRESENTATION LINKBASE DOCUMENT
101 DEFINITION LINKBASE DOCUMENT

 

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

SECTOR 5, INC.
BALANCE SHEETS
	March 31,			December 31,
	2016			2015
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	13		$	62
Total Current Assets		13			62
TOTAL ASSETS	$	13		$	62
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,021		$	23,063
Other payable, related party		41,600			18,637
Total Current Liabilities		43,621			41,700
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 75,000,000 shares authorized; 20,000,000 shares issued and outstanding		20,000			20,000
Additional paid in capital		61,650			61,650
Accumulated deficit		(125,258	)		(123,288	)
Total Stockholders' Equity		(43,608	)		(41,638	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13		$	62

 

The accompanying notes are an integral part of these unaudited financial statements.

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SECTOR 5, INC.
STATEMENTS OF OPERATIONS
	For the Three Months Ended March 31,
	2016			2015
	(unaudited)			(unaudited)
REVENUE:
Sales	$	-		$	-
		-			-
COST OF GOODS SOLD		-			-
GROSS MARGIN		-			-
OPERATING EXPENSES
Selling, general and administrative expenses		1,970			2,047
TOTAL OPERATING EXPENSES		1,970			2,047
LOSS FROM OPERATIONS		(1,970	)		(2,047	)
OTHER EXPENSE (INCOME)
Interest expense		-			-
Interest income		-			-
TOTAL OTHER EXPENSE (INCOME)		-			-
NET LOSS	$	(1,970	)	$	(2,047	)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$	(0.00	)	$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED		20,000,000			20,000,000

 

The accompanying notes are an integral part of these unaudited financial statements.

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SECTOR 5, INC.
STATEMENT OF CASH FLOWS
	For the Three Months Ended March 31,
	2016			2015
	(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,970	)	$	(2,047	)
Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities:
Bank overdraft		-			6
(Decrease) increase in accounts payable		(21,042	)		1,574
Net cash used by operating activities		(23,012	)		(467	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used by investing activities		-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in other payable, related party		22,963			-
Capital contribution from stockholder		-			450
Net cash provided by financing activities		22,963			450
Net decrease in cash and cash equivalents		(49	)		(17	)
Cash and cash equivalents, beginning of period		62			17
Cash and cash equivalents, end of period	$	13		$	-
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-

The accompanying notes are an integral part of these unaudited financial statements.

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SECTOR 5, INC.
Notes to the Financial Statements

As of March 31, 2016

(unaudited)

1. Nature of Operations and Significant Accounting Policies

Nature of Operations

SECTOR 5, INC. ("Sector 5" or the "Company") was incorporated in the State of Nevada on April 11, 2012. On March 18, 2016 a change in control of the Company occurred. The change in control includes plans to relaunch the Company to sell branded electronic products targeting the educational and consumer electronics markets. Sector 5 plans to take advantage of the educational market using a supply-chain methodology involving Open Innovation. Sector 5 has relationships with Chinese suppliers and American ingenuity that allow us to create products with the latest technology, matching market expectations at the best pricing. Furthermore, we intend to use mobile carriers as sales channels on some unique new 4G LTE products which employ mobile data networks.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 2015. The results of operations for the three months ended March 31, 2016 and 2015 are not necessarily indicative of those to be expected for the entire year. and should be read in conjunction with Form 10-K.

In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.

Use of Estimates

The Financial Statements have been prepared in conformity with U.S. GAAP, which requires using management's best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these good faith estimates and judgments.

Financial Instruments

The Company's balance sheet includes cash, accounts payable and related party payables. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

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Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 "Fair Value Measurements and Disclosures" (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

The Company applied ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities did not have a significant impact on the Company's financial statements.

Cash and Cash Equivalents

Cash and cash equivalents includes all cash deposits and highly liquid financial instruments with a maturity of three months or less.

Cash Flow Reporting

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method ("Indirect method") as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.

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Accounts Receivable, Credit

The Company currently has not generated any revenue from operations. The Company will be charging for referral fees at the time a referral is placed. Fee for referral will be based on a negotiation between third parties. There is no subscription base for belonging to the group. Billings will occur at the point of referral transmission and collection on customer accounts through credit cards or direct payments. The Company does not issue credit on services provided, therefore there will be no accounts receivable. No allowance for doubtful accounts is considered necessary to be established for amounts that may not be recoverable, since there has been no credit issued.

Share-based payments

Share-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented. The company may issue shares as compensation in the future periods for employee services.

The Company may issue restricted stock to consultants for various services. Cost for these transactions will be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete. The company has not issued shares during the periods presented, however it anticipates that shares may be issued in the future.

Revenue recognition

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.

The Company has not generated revenue, has not issued guarantees or other warranties. The Company has not experienced any refund requests or committed to any adjustments for failed references. The Company does not believe that there is any liability.

Advertising

The costs of advertising are expensed as incurred. Advertising expense was $0 for the year ended March 31, 2016.

Research and Development

The Company expenses research and development costs when incurred. Research and development costs include software engineering and testing of product and outputs. Indirect costs related to research and developments are allocated based on percentage usage to the research and development. To current date, there have been no research and development expenses.

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Income taxes

The Company accounts for income taxes under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") No. 740, Income Taxes ("ASC 740"). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Earnings (loss) per share

Basic earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares outstanding during the year. Diluted earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares. The Company does not have any potentially dilutive instruments and, thus, anti-dilution issues are not applicable.

Recent Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Update ("ASU") accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

2. Going Concern

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established an ongoing source of revenues sufficient to cover its operating cost, and requires additional capital to commence its operating plan. The Company has incurred a net loss for the three months ended March 31, 2016 in the amount of $1,970. The Company has a history of losses, resulting in an accumulated deficit of $125,258. Furthermore, the Company has negative working capital of $43,608. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan to obtain such resources for the Company include: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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3. Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting basis and the tax basis of the assets and liabilities and are measured using enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.

The Company has generated operating losses from operations to date; based on uncertainties concerning its ability to generate taxable income in future periods any tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the years ended December 31, 2015 or 2014.

Under the Internal Revenue Code of 1986, as amended, these losses can be carried forward twenty years. As of March 31, 2016 the Company has net operating loss carry forwards of approximately $125,000, which begin to expire in 2032.

Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years.

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4. Related Party Transactions

Loans from Shareholder

During the three months ended March 31, 2016, a related party assisted the Company in support of its operations by providing payments to the Company's vendors for $22,963 and an additional $18,637 provided during the year ended December 31, 2015. The Company has recorded the liability to this related party in other payables as the amounts are temporary in nature and have not been formalized by a promissory note. These amounts are considered due on demand and non-interest bearing.

In support of the Company's efforts and cash requirements, the Company is relying on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of equity or traditional debt financing. Amounts represent advances or amounts paid in satisfaction of certain liabilities as they come due. The majority shareholder has pledged her support to fund continuing operations; however there is no written commitment to this effect. The Company is dependent upon the continued support of this member.

The Company utilizes space provided by the majority shareholder without charge. Rent was $0 for all periods presented.

The Company does not have an employment contract with its key employee, the sole shareholder who is the Chief Executive and Chief Technical Officer.

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.

5. Equity

The total number of shares of capital stock which the Company shall have authority to issue is seventy-five million (75,000,000) common shares with a par value of $0.001, of which 15,000,000 is issued Kirkland Holding Co., a Delaware corporation controlled by Roger B. McKeague, and 5,000,000 have been issued under a Form S1 registration statement at $0.01 per share. The Company intends to issue additional shares in an effort to raise capital to fund its operations. Common shareholders will have one vote for each share held.

No holder of shares of stock of any class is entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock of any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.

There are no preferred shares authorized or outstanding. There have been no warrants or options issued or outstanding.

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Effective December 31, 2014 the board of directors cancelled 15,000,000 common shares of our former officer and director, Jeannie Bacal. Effective December 31, 2014, the board of directors issued Rafael Solorio 15,000,000 common shares of stock for appointment as an officer and director. The shares were effectively transferred under a private equity transaction; therefore, no gain or loss was recognized by this transaction.

On March 18, 2016, Rafael Solorio, the Chief Executive Officer and a significant shareholder of the Company, privately sold 15,000,000 shares of common stock of the Company, to Kirkland Holding Co., a Delaware corporation ("Kirkland") controlled by Roger B. McKeague, pursuant to a stock purchase agreement. As a result of the privately-negotiated sale, a change in control of the Company occurred and Kirkland now owns approximately 75% of the total outstanding shares of our Common Stock.

Kirkland purchased the shares for a total of $400,000 in cash. The terms of the purchase and sale transaction were as a result of arm's-length negotiations between Mr. Solorio and Kirkland. Neither party had any relationship with the other prior to the transaction.

In connection with the change in control, Mr. Solorio, the Company's then sole officer, resigned from his positions, as to which there were no prior disagreements or disputes with the Company. Mr. Solorio appointed Roger B. McKeague to the Company's Board of Directors and to be the Company's Chief Executive Officer, Chief Accounting Officer, Treasurer and Secretary, and subsequently resigned as the Company's former sole director.

6. Contingencies

Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.

From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company's financial position or results of operations.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our financial statements, including the notes thereto, appearing in this report and are hereby referenced. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this report. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

These forward-looking statements are based on our management's current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify a forward-looking statement by the use of the forward-terminology, including words such as "may", "will", "believes", "anticipates", "estimates", "expects", "continues", "should", "seeks", "intends", "plans", and/or words of similar import, or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. These forward-looking statements relate to, among other things: our sales, results of operations and anticipated cash flows; capital expenditures; depreciation and amortization expenses; sales, general and administrative expenses; our ability to maintain and develop relationship with our existing and potential future customers; and, our ability to maintain a level of investment that is required to remain competitive. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including, but not limited to: variability of our revenues and financial performance; risks associated with technological changes; the acceptance of our products in the marketplace by existing and potential customers; disruption of operations or increases in expenses due to our involvement with litigation or caused by civil or political unrest or other catastrophic events; general economic conditions, government mandates; and, the continued employment of our key personnel and other risks associated with competition.

On March 18, 2016, a change in control of Sector 5 occurred. The change in control included plans of new management to relaunch Sector 5 to sell branded electronic products using the Sector 5 name targeting the educational and consumer electronics markets. No such activities had previously occurred and Sector 5 has commenced only minimal operations to date and has not generated revenues. Sector 5 will not be profitable until it derives sufficient revenues and cash flows from planned operations.

The consolidated financial statements included in this Annual Report on Form 10-K relate to our prior operations that relate to women's fashion design. Due to the change in control and management's determination to relaunch our business, as noted above, we believe the financial statements are not necessarily meaningful to a review of our company.

Plan of Operation

Sector 5 plans to sell branded electronic products targeting the educational and consumer electronics markets. Sector 5 intends to target the retail consumer electronics market using a supply-chain methodology involving "Open Innovation." This is accomplished through Sector 5's relationships with Chinese suppliers and American ingenuity that allows us to create products using the latest technology and matching market expectations at the best pricing. This approach will be accomplished through the involvement of a talented staff, including designers and innovators, coupled with strong relationships with "best in class" suppliers.

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Sector 5's distribution channel strategy includes both B2B (especially schools), as well as utilization of existing relationships with distributors that have retail channels looking for new innovative products. Furthermore, we intend to use mobile carriers as sales channels on some unique new 4G LTE products which employ mobile data networks. Building and maintaining distribution relationships will be an essential element of our plan. In our product planning efforts, we expect to listen to these sales channels for what opportunities they have, as well as providing them new product opportunities we are planning. The latter will become increasingly important as we intend to grow a portfolio of products uniquely ours in late 2016.

Sector 5's foundation of promise is defined by a pursuit of simplicity and a commitment to innovation. Quay, reliability and excellent customer support will be an integral component of that commitment.

Results of Operations for the Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

Revenues. The Company did not have any revenue for the three months ended March 31, 2016 and 2015.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended March 31, 2016 were $1,970 as compared to $2,047 for the three months ended March 31, 2015. General and administrative expenses decreased because the Company did not incur consulting expenses.

Liquidity and Capital Resources

We measure our liquidity in a number of ways, including the following:

	As of March 31, 2016			As of December 31, 2015
Cash and Cash Equivalents	$	13		$	62
Working Capital (Deficit)		(43,608	)		(41,638	)
Debt (current)		43,621			41,700

The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about the Company's ability to continue as a going concern.

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In order to continue as a going concern, the Company will need, among other things, additional capital resources.

Impact of Inflation

We believe that the rate of inflation has had negligible effect on our operations. We believe we can absorb most, if not all, increased non-controlled operating costs by increasing sales prices, whenever deemed necessary and by operating our Company in the most efficient manner possible.

Net Cash Used in Operating Activities

We experienced no cash flow from operating activities for the three months ended March 31, 2016. The cash used in operating activities during this period was used to fund the net loss of $1,970, adjusted for the decrease in accounts payable from prior legal and accounting services. We experienced negative cash flow from operating activities for the three months ended March 31, 2016 in the amount of $23,012.

Net Cash Used in Investing Activities

The cash used in investing activities during the three months ended March 31, 2016 and 2015 was $0.

Net Cash Provided by Financing Activities

Cash provided by financing activities during the three months ended March 31, 2016 was $22,963 and $450 during the three months ended March 31, 2015. 

Availability of Additional Funds

Based on our working capital as of March 31, 2016, we will need additional equity and/or debt financing to continue our operations during the next 12 months. We have limited funds to continue our operating activities. Future operating activities are expected to be funded by loans from officers, directors and major shareholders, until we begin to raise capital from non-officers or non-directors or generate cash flows from operations.

Critical Accounting Policies and Estimates

Our financial statements and accompanying notes have been prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") applied on a consistent basis. The preparation of financial statements in conformity with United States GAAP 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 periods. Actual results could differ from these estimates. Our significant estimates and assumptions include amortization, the fair value of our stock, and the valuation allowance relating to the Company's deferred tax assets.

 

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We qualify as an "emerging growth company", as defined in the Jumpstart Our Business Startups Act, which became law in April, 2012. Under the JOBS Act, "emerging growth companies", can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Material Commitments

There was no material commitment during the three months ended March 31, 2016.

Purchase of Furniture and Equipment

We purchased no equipment during the three months ended March 31, 2016.

Recent Accounting Pronouncements

We have adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on our financial position or results of operations.

Off Balance Sheet Arrangements

As of March 31, 2016, we had no off balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Disclosure under this section is not required for a smaller reporting company.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer (being the same person), to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

16

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company's principal executive and financial officer and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2016. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. The COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information and communications and ongoing monitoring.

Based on an evaluation under the supervision and with the participation of the Company's management, the Company's principal executive officer and principal financial officer has concluded that the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of March 31, 2016 (the "Evaluation Date"), to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Each of the following is deemed a material weakness in our internal control over financial reporting:

● We do not have an audit committee. While we are not currently obligated to have an audit committee, including a member who is an "audit committee financial expert," as defined in Item 407 of Regulation S-K, under applicable regulations or listing standards; however, it is management's view that such a committee is an important internal control over financial reporting, the lack of which may result in ineffective oversight in the establishment and monitoring of internal controls and procedures.

● We did not maintain proper segregation of duties for the preparation of our financial statements. We currently have only one officer overseeing all transactions. This has resulted in several deficiencies, including the lack of control over preparation of financial statements and proper application of accounting policies.

17

Management believes that the material weaknesses set forth in the two items above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 Management's Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to initiate the following series of measures once we have the financial resources to do so:

● We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to an audit committee resulting in a fully functioning audit committee, which will undertake the oversight in the establishment and monitoring of required internal controls and procedures, such as reviewing and approving estimates and assumptions made by management when funds are available to us.

● Management believes that the appointment of outside directors to a fully functioning audit committee, would remedy the lack of a functioning audit committee.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This Quarterly Report does not include an attestation report of the Company's registered independent public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this Quarterly Report.

18

PART II OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

19

Item 6. Exhibits

(a) Exhibits

Exhibit No.	Description
Exhibit 31.1	302 Certification – Roger B. McKeague
Exhibit 32.1	906 Certification – Roger B. McKeague
101	Interactive data files pursuant to Rule 405 of Regulation S-T

(b) Reports of Form 8-K

20

Item 5.01. Changes in Control of Registrant.

On March 18, 2016, Rafael Solorio, the Chief Executive Officer and a significant shareholder of the Company, privately sold 15,000,000 shares of common stock of the Company, constituting approximately 75% of the Company's then outstanding shares, to Kirkland Holding Co., a Delaware corporation ("Kirkland") controlled by Roger B. McKeague, pursuant to a stock purchase agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated by reference herein. As a result of the privately-negotiated sale, a change in control of the Company occurred.

Kirkland purchased the shares for a total of $400,000 in cash. The terms of the purchase and sale transaction were as a result of arm's-length negotiations between Mr. Solorio and Kirkland. Neither party had any relationship with the other prior to the transaction.

In connection with the change in control, Mr. Solorio, the Company's then sole officer, resigned from his positions, as to which there were no prior disagreements or disputes with the Company. Mr. Solorio appointed Roger B. McKeague to the Company's Board of Directors and to be the Company's Chief Executive Officer, Chief Accounting Officer, Treasurer and Secretary, and subsequently resigned as the Company's former sole director.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

In connection with the transaction with Kirkland described in Item 5.01 above, on March 18, 2016, Rafael Solorio, resigned his positions as Chief Executive Officer, Chief Accounting Officer, Treasurer, Secretary and director of the Company.

21

On March 18, 2016, Roger B. McKeague, age 49, was elected a director and appointed to serve as Chief Executive Officer, Chief Accounting Officer, Treasurer and Secretary of the Company. Prior to joining the Company, Mr. McKeague was the Chief Executive Officer of Sector Five, Inc., an unaffiliated Delaware company involved in marketing educational computing products and consumer electronics, and was an attorney and business consultant focused on business and education management from June 2013 to March 2016. Previously, he was Executive Director at the Charter School Administrative Office for the State of Hawaii in Honolulu from December 2008 to June 2013. Mr. McKeague was a consultant for Forest City, Hawaii where he worked on External Affairs and Legal and Development projects from September 2006 to June 2008. He was Special Assistant to the Director for the Hawaii State Department of Health in Honolulu where he provided executive direction over Department functions and programs on behalf of the Director from December 2003 to July 2005. Mr. McKeague was an Advisor and Policy Analyst in the Office of the Governor of Hawaii from November 2002 to December 2003. He was Chief of Staff for Representative Bud Stonebraker in the Hawaii State Legislature from January 2001 to December 2002. Mr. McKeague was General Legal Counsel for Dawson International, Inc. in Honolulu, Hawaii from January 1998 to December 1998. He was a litigation associate for Dwyer Imanaka Schraff Kudo Meyer & Fujimoto in Honolulu from January 1996 to October 1996, and was the Staff Attorney for the House of Representatives Majority Staff Office from January 1995 to July 1995. Mr. McKeague received his J.D. degree from Lewis & Clark, Northwestern School of Law and his B.A. degree from the University of Hawaii at Manoa.

Mr. McKeague does not have any family relationships with any of the directors, executive officers, or any people nominated or chosen by the Company to become a director or executive officer. Mr. McKeague was not previously engaged in a related party transaction with the Company at any time.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On April 14, 2016, Peter Mortensen, age 50, was appointed to serve as President of the Company. Prior to joining the Company Mr. Mortensen worked as a Consultant for Hop-on, Inc., from August 2014 to March 2016. As a full time employee at Hop-On, he assisted the CEO with strategies in technology and products for Hop-on. He also provided oversight of the manufacturing and working with suppliers. From 2013 to 2014, Mr. Mortensen was the Software R&D Director of Panasonic Avionics, located in Lake Forest, California. Mr. Mortensen managed a department of 52 software developers covering R&D in Android and Linux software development for inflight entertainment (IFE) systems for all major airlines both for passengers (seatback systems) and crew (in-wall and mobile terminals). From 2011 to 2013, Mr. Mortensen was Foreign Expert and Director of Product Planning for Digital Products Group, a Company specializing in mobile phones, tablets & TVs. His responsibilities included identifying weak-points in processes and organization towards becoming a leading value brand. He recommended improvements to CTO, defined strategy for global product R&D (focus software) with international open innovation centers. He also worked as primary point of contact for non-Chinese technology and component vendors where he led all vendor meetings. Mr. Mortensen worked with Haier Europe and Haier America on planning future next generation models. From 2010 to 2011, Mr. Mortensen was Senior Product Manager Televisions – Product Group for VIZIO, Irvine, California where he defined and managed all TV product and technology roadmaps. From 2005 to 2010, Mr. Mortensen was Department Manager for Software Development Group, Mitsubishi Digital Electronics of America, Irvine, California, where he managed the software engineering of the 2006-2010 product portfolios of Mitsubishi flat panel LCD and rear projection DLP televisions to completion within time and within schedule (approx. 92 television models). 

Mr. Mortensen graduated from the Southern University of Denmark with a B.S. in Computer Science in 1988 and has earned several certificates in management, quality assurance and corporate leadership subsequently.

Mr. Mortensen does not have any family relationships with any of the directors, executive officers, or any people nominated or chosen by the Company to become a director or executive officer. Mr. Mortensen was not previously engaged in a related party transaction with the Company at any time.

22

 

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.

	SECTOR 5, INC.
Date: May 16, 2016	By:	/s/ Roger B. McKeague
		Roger B. McKeague
		Chairman, President
		Chief Executive Officer and Treasurer
		(Principal Accounting Officer and Authorized Officer)

23

Sector 5, Inc.

Index to Exhibits

Exhibit No.	Description
Exhibit 31.1	302 Certification – Roger B. McKeague
Exhibit 32.1	906 Certification – Roger B. McKeague
101	Interactive data files pursuant to Rule 405 of Regulation S-T

24

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Roger B. McKeague, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Sector 5, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's first fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 16, 2016	By:	/s/ Roger B. McKeague
		Roger B. McKeague
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to their knowledge, the Quarterly Report on Form 10-Q for the period ended March 31, 2016 of Sector 5, Inc. (the "Company") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in such periodic report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in such report.

Dated: May 16, 2016	By:	/s/ Roger B. McKeague
		Roger B. McKeague
		Chief Executive Officer
	By:	/s/ Roger B. McKeague
		Roger B. McKeague
		Chief Financial Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Sector 5, Inc. and will be furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 12, 2016
Document And Entity Information
Entity Registrant Name	Sector 5, Inc.
Entity Central Index Key	0001550737
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		20,000,000
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2016

XML

BALANCE SHEETS - USD ($)	Mar. 31, 2016	Dec. 31, 2015
CURRENT ASSETS:
Cash and cash equivalents	$ 13	$ 62
Total Current Assets	13	62
TOTAL ASSETS	13	62
CURRENT LIABILITIES:
Accounts payable	2,021	23,063
Other payable, related party	41,600	18,637
Total Current Liabilities	43,621	41,700
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 75,000,000 shares authorized; 20,000,000 shares issued and outstanding	20,000	20,000
Additional Paid in Capital	61,650	61,650
Accumulated deficit	(125,258)	(123,288)
Total Stockholders' Equity	(43,608)	(41,638)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 13	$ 62

XML

BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
STOCKHOLDERS' EQUITY
Common stock, par value	$ 0.001	$ 0.001
Common stock shares, authorized	75,000,000	75,000,000
Common stock shares, issued	20,000,000	20,000,000
Common stock shares, outstanding	20,000,000	20,000,000

XML

STATEMENTS OF OPERATIONS (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
REVENUE:
Sales
Total revenue
COST OF GOODS SOLD
GROSS MARGIN
OPERATING EXPENSES
Selling, general and administrative expenses	$ 1,970	$ 2,047
TOTAL OPERATING EXPENSES	1,970	2,047
LOSS FROM OPERATIONS	$ (1,970)	$ (2,047)
OTHER EXPENSE (INCOME)
Interest expense
Interest income
TOTAL OTHER EXPENSE (INCOME)
NET LOSS	$ (1,970)	$ (2,047)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$ (0.00)	$ (0.00)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED	20,000,000	20,000,000

XML

STATEMENTS OF CASH FLOWS (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (1,970)	$ (2,047)
Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities:
Bank overdraft		6
(Decrease) increase in accounts payable	$ (21,042)	1,574
Net cash used by operating activities	$ (23,012)	$ (467)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in other payable, related party	$ 22,963
Capital contribution from stockholder		$ 450
Net cash provided by financing activities	$ 22,963	450
Net decrease in cash and cash equivalents	(49)	(17)
Cash and cash equivalents, beginning of period	62	$ 17
Cash and cash equivalents, end of period	$ 13
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
Cash paid for taxes

XML

1. Nature of Operations and Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

1. Nature of Operations and Significant Accounting Policies

Nature of Operations

SECTOR 5, INC. ("Sector 5" or the "Company") was incorporated in the State of Nevada on April 11, 2012. On March 18, 2016 a change in control of the Company occurred. The change in control includes plans to relaunch the Company to sell branded electronic products targeting the educational and consumer electronics markets. Sector 5 plans to take advantage of the educational market using a supply-chain methodology involving Open Innovation. Sector 5 has relationships with Chinese suppliers and American ingenuity that allow us to create products with the latest technology, matching market expectations at the best pricing. Furthermore, we intend to use mobile carriers as sales channels on some unique new 4G LTE products which employ mobile data networks.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 2015. The results of operations for the three months ended March 31, 2016 and 2015 are not necessarily indicative of those to be expected for the entire year. and should be read in conjunction with Form 10-K.

In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.

Use of Estimates

The Financial Statements have been prepared in conformity with U.S. GAAP, which requires using management's best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these good faith estimates and judgments.

Financial Instruments

The Company's balance sheet includes cash, accounts payable and related party payables. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 "Fair Value Measurements and Disclosures" (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

The Company applied ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities did not have a significant impact on the Company's financial statements.

Cash and Cash Equivalents

Cash and cash equivalents includes all cash deposits and highly liquid financial instruments with a maturity of three months or less.

Cash Flow Reporting

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method ("Indirect method") as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.

Accounts Receivable, Credit

The Company currently has not generated any revenue from operations. The Company will be charging for referral fees at the time a referral is placed. Fee for referral will be based on a negotiation between third parties. There is no subscription base for belonging to the group. Billings will occur at the point of referral transmission and collection on customer accounts through credit cards or direct payments. The Company does not issue credit on services provided, therefore there will be no accounts receivable. No allowance for doubtful accounts is considered necessary to be established for amounts that may not be recoverable, since there has been no credit issued.

Share-based payments

Share-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented. The company may issue shares as compensation in the future periods for employee services.

The Company may issue restricted stock to consultants for various services. Cost for these transactions will be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete. The company has not issued shares during the periods presented, however it anticipates that shares may be issued in the future.

Revenue recognition

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.

The Company has not generated revenue, has not issued guarantees or other warranties. The Company has not experienced any refund requests or committed to any adjustments for failed references. The Company does not believe that there is any liability.

Advertising

The costs of advertising are expensed as incurred. Advertising expense was $0 for the year ended March 31, 2016.

Research and Development

The Company expenses research and development costs when incurred. Research and development costs include software engineering and testing of product and outputs. Indirect costs related to research and developments are allocated based on percentage usage to the research and development. To current date, there have been no research and development expenses.

Income taxes

The Company accounts for income taxes under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") No. 740, Income Taxes ("ASC 740"). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Earnings (loss) per share

Basic earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares outstanding during the year. Diluted earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares. The Company does not have any potentially dilutive instruments and, thus, anti-dilution issues are not applicable.

Recent Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Update ("ASU") accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

XML

2. Going Concern

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

2. Going Concern

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established an ongoing source of revenues sufficient to cover its operating cost, and requires additional capital to commence its operating plan. The Company has incurred a net loss for the three months ended March 31, 2016 in the amount of $1,970. The Company has a history of losses, resulting in an accumulated deficit of $125,258. Furthermore, the Company has negative working capital of $43,608. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan to obtain such resources for the Company include: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

XML

3. Income Taxes

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

3. Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting basis and the tax basis of the assets and liabilities and are measured using enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.

The Company has generated operating losses from operations to date; based on uncertainties concerning its ability to generate taxable income in future periods any tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the years ended December 31, 2015 or 2014.

Under the Internal Revenue Code of 1986, as amended, these losses can be carried forward twenty years. As of March 31, 2016 the Company has net operating loss carry forwards of approximately $125,000, which begin to expire in 2032.

Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years.

XML

4. Related Party Transactions

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

4. Related Party Transactions

Loans from Shareholder

During the three months ended March 31, 2016, a related party assisted the Company in support of its operations by providing payments to the Company's vendors for $22,963 and an additional $18,637 provided during the year ended December 31, 2015. The Company has recorded the liability to this related party in other payables as the amounts are temporary in nature and have not been formalized by a promissory note. These amounts are considered due on demand and non-interest bearing.

In support of the Company's efforts and cash requirements, the Company is relying on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of equity or traditional debt financing. Amounts represent advances or amounts paid in satisfaction of certain liabilities as they come due. The majority shareholder has pledged her support to fund continuing operations; however there is no written commitment to this effect. The Company is dependent upon the continued support of this member.

The Company utilizes space provided by the majority shareholder without charge. Rent was $0 for all periods presented.

The Company does not have an employment contract with its key employee, the sole shareholder who is the Chief Executive and Chief Technical Officer.

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.

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5. Equity

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

5. Equity

The total number of shares of capital stock which the Company shall have authority to issue is seventy-five million (75,000,000) common shares with a par value of $0.001, of which 15,000,000 is issued Kirkland Holding Co., a Delaware corporation controlled by Roger B. McKeague, and 5,000,000 have been issued under a Form S1 registration statement at $0.01 per share. The Company intends to issue additional shares in an effort to raise capital to fund its operations. Common shareholders will have one vote for each share held.

No holder of shares of stock of any class is entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock of any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.

There are no preferred shares authorized or outstanding. There have been no warrants or options issued or outstanding.

Effective December 31, 2014 the board of directors cancelled 15,000,000 common shares of our former officer and director, Jeannie Bacal. Effective December 31, 2014, the board of directors issued Rafael Solorio 15,000,000 common shares of stock for appointment as an officer and director. The shares were effectively transferred under a private equity transaction; therefore, no gain or loss was recognized by this transaction.

On March 18, 2016, Rafael Solorio, the Chief Executive Officer and a significant shareholder of the Company, privately sold 15,000,000 shares of common stock of the Company, to Kirkland Holding Co., a Delaware corporation ("Kirkland") controlled by Roger B. McKeague, pursuant to a stock purchase agreement. As a result of the privately-negotiated sale, a change in control of the Company occurred and Kirkland now owns approximately 75% of the total outstanding shares of our Common Stock.

Kirkland purchased the shares for a total of $400,000 in cash. The terms of the purchase and sale transaction were as a result of arm's-length negotiations between Mr. Solorio and Kirkland. Neither party had any relationship with the other prior to the transaction.

In connection with the change in control, Mr. Solorio, the Company's then sole officer, resigned from his positions, as to which there were no prior disagreements or disputes with the Company. Mr. Solorio appointed Roger B. McKeague to the Company's Board of Directors and to be the Company's Chief Executive Officer, Chief Accounting Officer, Treasurer and Secretary, and subsequently resigned as the Company's former sole director.

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6. Contingencies

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

6. Contingencies

Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.

From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company's financial position or results of operations.

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1. Nature of Operations and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Nature Of Operations And Significant Accounting Policies Policies

Nature of Operations

SECTOR 5, INC. ("Sector 5" or the "Company") was incorporated in the State of Nevada on April 11, 2012. On March 18, 2016 a change in control of the Company occurred. The change in control includes plans to relaunch the Company to sell branded electronic products targeting the educational and consumer electronics markets. Sector 5 plans to take advantage of the educational market using a supply-chain methodology involving Open Innovation. Sector 5 has relationships with Chinese suppliers and American ingenuity that allow us to create products with the latest technology, matching market expectations at the best pricing. Furthermore, we intend to use mobile carriers as sales channels on some unique new 4G LTE products which employ mobile data networks.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 2015. The results of operations for the three months ended March 31, 2016 and 2015 are not necessarily indicative of those to be expected for the entire year. and should be read in conjunction with Form 10-K.

In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.

Use of Estimates

The Financial Statements have been prepared in conformity with U.S. GAAP, which requires using management's best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these good faith estimates and judgments.

Financial Instruments

The Company's balance sheet includes cash, accounts payable and related party payables. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 "Fair Value Measurements and Disclosures" (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

The Company applied ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities did not have a significant impact on the Company's financial statements.

Cash and Cash Equivalents

Cash and cash equivalents includes all cash deposits and highly liquid financial instruments with a maturity of three months or less.

Cash Flow Reporting

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method ("Indirect method") as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.

Accounts Receivable, Credit

The Company currently has not generated any revenue from operations. The Company will be charging for referral fees at the time a referral is placed. Fee for referral will be based on a negotiation between third parties. There is no subscription base for belonging to the group. Billings will occur at the point of referral transmission and collection on customer accounts through credit cards or direct payments. The Company does not issue credit on services provided, therefore there will be no accounts receivable. No allowance for doubtful accounts is considered necessary to be established for amounts that may not be recoverable, since there has been no credit issued.

Share-based payments

Share-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented. The company may issue shares as compensation in the future periods for employee services.

The Company may issue restricted stock to consultants for various services. Cost for these transactions will be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete. The company has not issued shares during the periods presented, however it anticipates that shares may be issued in the future.

Revenue recognition

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.

The Company has not generated revenue, has not issued guarantees or other warranties. The Company has not experienced any refund requests or committed to any adjustments for failed references. The Company does not believe that there is any liability.

Advertising

The costs of advertising are expensed as incurred. Advertising expense was $0 for the year ended March 31, 2016.

Research and Development

The Company expenses research and development costs when incurred. Research and development costs include software engineering and testing of product and outputs. Indirect costs related to research and developments are allocated based on percentage usage to the research and development. To current date, there have been no research and development expenses.

Income taxes

The Company accounts for income taxes under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") No. 740, Income Taxes ("ASC 740"). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Earnings (loss) per share

Basic earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares outstanding during the year. Diluted earnings (loss) per share calculations are determined by dividing net income (loss) by the weighted average number of shares. The Company does not have any potentially dilutive instruments and, thus, anti-dilution issues are not applicable.

Recent Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Update ("ASU") accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

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1. Nature of Operations and Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Nature Of Operations And Significant Accounting Policies Details Narrative
Advertising expense	$ 0	$ 0

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2. Going Concern (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Going Concern Details Narrative
Net loss	$ (1,970)	$ (2,047)
Accumulated deficit	(125,258)		$ (123,288)
Working capital	$ (43,608)		$ (41,638)

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3. Income Taxes (Details Narrative)	3 Months Ended
	Mar. 31, 2016 USD ($)
Income Taxes Details Narrative
Net operating loss carry forwards	$ 125,000
Net operating loss carry forwards expiration date	2032

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4. Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Related Party Transactions Details Narrative
Increase in other payable, related party	$ 22,963		$ 18,637