America Great Health - Quarter Report: 2016 December (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
T | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2016
£ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___
Commission File No. 000-27873
CROWN MARKETING
(Exact name of registrant as specified in its charter)
Wyoming (State or other jurisdiction of incorporation or organization) | 98-0178621 (I.R.S. Employer Identification No.) | ||
4350 Temple City Boulevard El Monte, CA (Address of principal executive offices) | 91731 (Zip Code) | ||
(626) 283-6600 (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer o | 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 o Nox
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the registrant’s common stock as of December 31, 2016 was 20,236,021,800.
CROWN MARKETING AND SUBSIDIARIES
DECEMBER 31, 2016
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION | 3 | |
ITEM 1 | Condensed Consolidated Financial Statements (Unaudited) | 3 |
ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk | 19 |
ITEM 4 | Controls and Procedures | 19 |
PART II – OTHER INFORMATION | 20 | |
ITEM 1 | Legal Proceedings | 20 |
ITEM 1A | Risk Factors | 20 |
ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 20 |
ITEM 3 | Defaults Upon Senior Securities | 20 |
ITEM 4 | Mine Safety Disclosures | 20 |
ITEM 5 | Other Information | 20 |
ITEM 6 | Exhibits | 20 |
PART I – FINANCIAL INFORMATION
This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
2
BALANCE SHEET
Crown Marketing and Subsidiaries | |||||
Condensed Consolidated Balance Sheets | |||||
December 31, |
| June 30, | |||
2016 | 2016 | ||||
(Unaudited) | |||||
ASSETS | |||||
CURRENT ASSETS | |||||
Cash | $ | 4,057 | 4,669 | ||
Other current assets under discontinued operations |
| 73,585 |
| 244,792 | |
TOTAL CURRENT ASSETS | $ | 77,642 | $ | 249,461 | |
LIABILITIES AND SHAREHOLDERS' DEFICIT | |||||
CURRENT LIABILITIES |
|
|
| ||
Current liabilities under discontinued operations | $ | 783,419 | $ | 174,597 | |
TOTAL CURRENT LIABILITIES | 783,419 | 174,597 | |||
Long-term liabilities under discontinued operations | -- | 1,168,129 | |||
|
|
| |||
TOTAL LIABILITIES |
| 783,419 | 1,342,726 | ||
SHAREHOLDERS' DEFICIT | |||||
Redeemable, convertible preferred stock, 10,000,000 shares authorized; | |||||
Series A voting preferred stock, zero and 500,000 shares issued and outstanding | -- | 500,000 | |||
Common stock, no par value, unlimited shares authorized; | |||||
20,236,021,800 and 20,056,021,800 shares issued and outstanding | -- | -- | |||
Additional paid-in capital | 2,356,154 | 550,000 | |||
Accumulated deficit |
| (3,061,931) |
| (2,143,265) | |
TOTAL SHAREHOLDERS' DEFICIT |
| (705,777) |
| (1,093,265) | |
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 77,642 | $ | 249,461 | |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
3
Crown Marketing and Subsidiaries | |||||||||||
Condensed Consolidated Statements of Operations | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
December 31, | December 31, | ||||||||||
2016 |
|
| 2015 | 2016 |
|
| 2015 | ||||
(Unaudited) | (Unaudited) | ||||||||||
DISCONTINUED OPERATIONS: | |||||||||||
Loss from discontinued operations | $ | (860,699) | $ | (114,990) | $ | (918,666) | $ | (808,011) | |||
|
|
|
|
|
|
|
| ||||
NET LOSS | $ | (860,699) | $ | (114,990) | $ | (918,666) | $ | (808,011) | |||
Net loss attributable to non-controlling interest | 0 | (4,673) | 0 | (8,088) | |||||||
|
| ||||||||||
NET LOSS ATTRIBUTABLE TO CROWN | $ | (860,699) | $ | (110,317) | $ | (918,666) | $ | (799,923) | |||
BASIC AND DILUTED LOSS PER SHARE | |||||||||||
FROM DISCONTINUED OPERATIONS | $ | (0) | $ | (0) | $ | (0) | $ | (0) | |||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |||||||||||
BASIC AND DILUTED | $ | 20,137,543,539 |
| 20,056,021,800 | $ | 20,096,782,670 |
| 20,042,570,713 | |||
The accompanying notes are an integral part of these condensed consolidated financial statements. |
4
Crown Marketing and Subsidiaries | |||||||||||||||||||
Condensed Consolidated Statement of Shareholders' Deficit (Unaudited) | |||||||||||||||||||
Preferred Stock |
| Common Stock | Additional | Accumulated | |||||||||||||||
Shares |
|
| Amount |
| Shares |
|
| Amount |
| Paid-in Capital |
|
| Deficit |
| Total | ||||
Balance, June 30, 2016 | 500,000 | $ | 500,000 | 20,056,021,800 | $ | -- | $ | 550,000 | $ | (2,143,265) | $ | (1,093,265) | |||||||
Gain on termination of deferred lease obligation - related party | -- | -- | -- | -- | 636,154 | -- | 636,154 | ||||||||||||
Issuance of common stock upon conversion of preferred stock | (500,000) | (500,000) | 80,000,000 | -- | 500,000 | -- | -- | ||||||||||||
Stock based compensation | -- | -- | 100,000,000 | -- | 670,000 | -- | 670,000 | ||||||||||||
Net loss for the six months ended December 31, 2016 | -- | -- | -- | -- | -- | (918,666) | (918,666) | ||||||||||||
Balance, December 31, 2016 (unaudited) | -- | $ | -- |
| 20,236,021,800 | $ | -- | $ | 2,356,154 | $ | (3,061,931) | $ | (705,777) | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements. |
5
Crown Marketing and Subsidiaries | |||||
Condensed Consolidated Statements of Cash Flows | |||||
Six Months Ended | |||||
December 31, | |||||
2016 |
|
| 2015 | ||
(Unaudited) | |||||
Cash Flows from Operating Activities | |||||
Net loss | $ | (918,666) | $ | (808,011) | |
Adjustments to reconcile net loss to net cash used in operating activities | |||||
Fair value of shares issued for services | -- | 525,000 | |||
Provision for bad debts | 14,858 | -- | |||
Stock based compensation | 670,000 | -- | |||
Accrued interest due to related party | 30,447 | 24,857 | |||
Changes in operating Assets and Liabilities: | |||||
Accounts receivable | (12,826) | -- | |||
Advances to suppliers | 242,760 | (228,671) | |||
Inventories | (56,895) | (147,693) | |||
Prepaid expenses | (16,690) | -- | |||
Accounts payable | 7,000 | 5,000 | |||
Due to related party | (5,600) | -- | |||
Deferred revenue | 35,000 | -- | |||
Accrued rent payable - related party | -- | 120,000 | |||
Deferred lease obligations - related party |
| -- | 55,385 | ||
Net cash used in operating activities |
| (10,612) |
| (454,133) | |
Cash Flows from Investing Activities | |||||
Sale of Crown Mobile common stock |
| -- | 25,000 | ||
Net cash provided by investing activities |
| -- |
| 25,000 | |
Cash Flows from Financing Activities | |||||
Proceeds from note payable - related party | -- | 500,000 | |||
Repayment of accrued interest - related party | -- | (23,000) | |||
Proceeds from short-term loans payable | 59,250 | ||||
Repayment of short-term loans payable | (49,250) | -- | |||
Advances from related party | -- | 34,977 | |||
Advances from related party |
| -- | (71,262) | ||
Net cash provided by financing activities |
| 10,000 |
| 440,715 | |
Net increase (decrease) in cash | (612) | 11,582 | |||
Cash beginning of period |
| 4,669 | 24,276 | ||
Cash end of period | $ | 4,057 | $ | 35,858 | |
Interest paid | $ | -- | $ | -- | |
Taxes paid | $ | -- | $ | -- | |
Non-cash transactions | |||||
Gain on termination of deferred lease obligation - related party | |||||
recorded as a contribution to additional paid-in capital | $ | 636,154 | $ | -- | |
Issuance of common stock for stock compensation | $ | 670,000 | $ | -- | |
Conversion of preferred stock to common stock | $ | 500,000 | $ | -- | |
Issuance of preferred stock to pay | |||||
accrued rent payable - related party | $ | -- | $ | 500,000 | |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
6
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Crown Marketing and Subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the year ending June 30, 2017.
Nature of the Business
Through December 31, 2016, the Company’s primary business activity was the sale of various consumer products and accessories. On January 19, 2017, the Company’s majority shareholder sold his shares to an investor group and the Company ceased its operations. Going forward, the Company’s operations will be determined by the new investor group. As such, the Company has accounted for all of its assets, liabilities and results of operations as discontinued operations as of December 31, 2016.
Going Concern
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company has incurred recurring net losses. For the six months ended December 31, 2016, the Company recorded a net loss of $918,666, used cash to fund operating activities of $10,612, and at December 31, 2016, had a shareholders’ deficit of $705,777. These factors create substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
During the six months ended December 31, 2016, the Company’s majority shareholder sold his shares to an investor group. The new owners’ plans to continue as a going concern revolve around its ability to achieve profitable operations, as well as raise necessary capital to pay ongoing general and administrative expenses of the Company. The ability of the Company to continue as a going concern is dependent on securing additional sources of capital and the success of the Company's plan. There is no assurance that the Company will be successful in raising the additional capital or in achieving profitable operations.
Our cash needs for the six months ended December 31, 2016 were primarily met by a short-term loan payable of $10,000, plus a note payable of $500,000 from a company owned by our majority shareholder during the year ended June 30, 2016. As of December 31, 2016, we had a cash balance of $4,057. Our new majority shareholders will need to provide all of our working capital until at least June 30, 2017.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Okra Energy and Crown Laboratory. Intercompany transactions and accounts have been eliminated in consolidation.
Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include accounting for potential liabilities and the assumptions made in valuing stock instruments issued for services. Actual results could differ from those estimates.
7
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenues
During the six months ended December 31, 2016, the Company’s revenues partly related to consignment sales. In the fourth quarter of fiscal 2016, the Company entered into agreements with certain of its vendors in which the Company agreed to sell the vendor’s products on a consignment basis. The Company accounts for the revenues on a net basis based on the guidance of ASC 605-45, as the Company acts as an agent under the agreements. The Company recognizes revenue under these consignment agreements when they ship the vendor’s products to their customers and recognize a 2.5% fee, per the agreements, on the date of shipment. The gross and net sales relating to the agreements during the three months ended December 31, 2016 were $130,000 and $3,250, respectively. The gross and net sales relating to the agreements during the six months ended December 31, 2016 were $513,027 and $12,826, respectively. There was no consignment sales during the three and six months ended December 31, 2015.
On product sales, primarily relating to scooter parts and other consumer products, the Company recognizes revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the price is fixed or determinable; and (iv) collectability is reasonably assured. Revenue is recognized for hardware product sales upon transfer of title and risk of loss to the customer. We record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on contractual return rights, historical sales returns, analysis of credit memo data and other factors known at the time. If actual future returns and pricing adjustments differ from past experience and our estimates, adjustments to revenue reserves may be required.
During the three months ended December 31, 2016, the Company entered into an agreement to develop an app for a customer. The Company hired a third party developer to develop the app. The total amount paid by the customer during the three months ended December 31, 2016 was $35,000. The amount paid by the customer was recorded as deferred revenue at December 31, 2016, as the app was not completed until January 2017. During the three months ended December 31, 2016, the Company paid the third party developer $16,690, which was recorded as a prepaid expense at December 31, 2016.
Effective January 1, 2017, all of the Company’s operations generating these sales became discontinued operations (see Note 3).
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market value. At December 31, 2016, inventories consisted of recent purchases of LED shoes, which the Company began selling during the three months ended December 31, 2016.
Advances to Suppliers
For certain vendors in which the Company agreed to sell its products on a consignment basis, the Company is required to make payments once the inventory is received. The Company records it as advances to suppliers since the title has not been transferred to the Company. Advances to suppliers were $242,760 at June 30, 2016. At December 31, 2016, the Company determined it would not be able to recover the remaining amount due from its vendors of $102,130 and wrote the balance off during the three months ended December 31, 2016.
8
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value Measurements
Fair value measurements are determined using authoritative guidance issued by the FASB, with the exception of the application of the guidance to non-recurring, non-financial assets and liabilities as permitted. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.
Level 3—Unobservable inputs based on the Company's assumptions.
The Company is required to use observable market data if available without undue cost and effort.
The Company’s financial instruments include cash and accounts payable. Management has estimated that the carrying amounts approximate their fair value due to the short-term nature.
Loss per Share
Basic earnings (loss) per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the six months ended December 31, 2016 and 2015, as there are no potential shares outstanding that would have a dilutive effect.
9
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
The Company periodically grants stock options and warrants to employees and non-employees in non-capital raising transactions as compensation for services rendered. The Company accounts for stock option and stock warrant grants to employees based on the authoritative guidance provided by the Financial Accounting Standards Board where the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and stock warrant grants to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board where the value of the stock compensation is determined based upon the measurement date at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option or warrant grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.
Segment Information
At December 31, 2016, the Company had one reportable operating segment. The Laboratory segment sells various consumer products and also develops and markets Chinese herbal and other remedies in the People’s Republic of China.
Effective January 1, 2017, all segments of the Company became discontinued operations (see Note 3).
For the three and six months ended December 31, 2016, no single customer accounted for 10% or more of sales and the Company had no foreign sales. For the three and six months ended December 31, 2015, no single customer accounted for 10% or more of sales, but the Company had foreign sales of $2,605 to one person located in the Peoples Republic of China. All other sales were domestic sales.
Recent Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2014-15 on the Company’s financial statements and disclosures.
In February 2015, the FASB issued Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements.
10
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
In July 2015, the FASB issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory, which requires that inventory within the scope of ASU 2015-11 be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not impacted by the new guidance. ASU 2015-11 applies to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for public business entities in fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2015-11 on the Company’s financial statements and disclosures.
In May 2014, the FASB issued an accounting standard update related to revenue from contracts with customers, which, along with amendments issued in 2015 and 2016, will supersede nearly all current U.S. GAAP guidance on this topic and eliminate industry-specific guidance. The underlying principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This accounting standard update, as amended, will be effective for the Company beginning in the first quarter of fiscal 2019. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized in retained earnings as of the date of adoption ("modified retrospective basis"). Early adoption is permitted, but no earlier than fiscal 2018. The Company expects to adopt this accounting standard update on a modified retrospective basis in the first quarter of fiscal 2019, and it is currently evaluating the impact of this accounting standard update on its financial statements and disclosures.
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or is not believed by management to have a material impact on the Company's present or future consolidated financial statements.
NOTE 3 – DISCONTINUED OPERATIONS
Through December 31, 2016, the Company’s primary business activity was the sale of various consumer products and accessories. As of January 1, 2017, the Company ceased operations. On January 19, 2017, a change of control took place, as the Company’s majority shareholder sold his 16,155,746,000 shares to an investor group.
The Company has reclassified its previously issued financial statements to segregate the discontinued operations as of the earliest period reported.
11
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 3 – DISCONTINUED OPERATIONS
Assets and liabilities related to the discontinued operations were as follows:
| 2016 |
| 2016 | ||
(Unaudited) | |||||
ASSETS | |||||
CURRENT ASSETS | |||||
Cash | $ | 4,057 | $ | 4,669 | |
Accounts receivable | - | 2,032 | |||
Inventory | 56,895 | - | |||
Advances to suppliers | - | 242,760 | |||
Prepaid expenses |
| 16,690 |
| - | |
TOTAL CURRENT ASSETS | $ | 77,642 | $ | 249,461 | |
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | |||||
CURRENT LIABILITIES | |||||
Accounts payable | $ | 11,020 | $ | 4,020 | |
Due to related party | - | 5,600 | |||
Accrued rent - related party | 120,000 | 120,000 | |||
Advances - related party | 34,977 | 34,977 | |||
Deferred revenue | 35,000 | - | |||
Loans payable | 10,000 | - | |||
Notes payable - related parties | 10,000 | 10,000 | |||
Note payable and accrued interest - related party | 562,422 |
| - | ||
TOTAL CURRENT LIABILITIES | 783,419 | 174,597 | |||
Deferred lease obligation - related party | - | 636,154 | |||
Note payable and accrued interest - related party |
| - |
| 531,975 | |
TOTAL LIABILITIES |
| 783,419 |
| 1,342,726 | |
SHAREHOLDERS' EQUITY (DEFICIT) | |||||
Redeemable, convertible preferred stock, 10,000,000 shares authorized; | |||||
Series A voting preferred stock, zero and 500,000 shares issued and outstanding | - | 500,000 | |||
Common stock, no par value, unlimited shares authorized; | |||||
20,236,021,800 and 20,056,021,800 shares issued and outstanding | - | - | |||
Additional paid-in capital | 2,356,154 | 550,000 | |||
Accumulated deficit |
| (3,061,931) |
| (2,143,265) | |
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) |
| (705,777) |
| (1,093,265) | |
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 77,642 | $ | 249,461 | |
T+A5:F44he accompanying notes are an integral part of these condensed consolidated financial statements. |
12
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 3 – DISCONTINUED OPERATIONS--Continued
Revenue and expenses related to the discontinued operations were as follows:
Three Months Ended | Six Months Ended | ||||||||||
| December 31, |
| December 31, | ||||||||
| 2016 |
|
| 2015 |
| 2016 |
|
| 2015 | ||
(Unaudited) | (Unaudited) | ||||||||||
Sales | $ | 13,650 | $ | 1,460,934 | $ | 40,026 | $ | 1,534,836 | |||
Cost of goods sold |
| 12,403 |
| 1,408,162 |
| 28,891 |
| 1,468,791 | |||
Gross profit |
| 1,247 |
| 52,772 |
| 11,135 |
| 66,045 | |||
Selling, general and administrative expenses: | |||||||||||
Rent expense (related party in 2015) | 7,000 | 147,693 | 27,786 | 295,385 | |||||||
Selling, general and administrative expenses |
| 838,972 |
| 35,145 |
| 870,818 | 584,113 | ||||
Total selling, general and administrative expenses |
| 845,972 |
| 182,838 |
| 898,604 |
| 879,498 | |||
Loss from operations | (844,725) | (130,066) | (887,469) | (813,453) | |||||||
Other expenses | |||||||||||
Rental income | -- | 30,300 | 30,300 | ||||||||
Interest expense, related party |
| (15,974) | (15,224) |
| (31,197) | (24,858) | |||||
| (15,974) |
| 15,076 |
| (31,197) |
| 5,442 | ||||
NET LOSS | (860,699) | (114,990) | (918,666) | (808,011) | |||||||
Net loss attributable to non-controlling interest | -- | (4,673) | -- | (8,088) | |||||||
NET LOSS ATTRIBUTABLE TO CROWN |
|
| |||||||||
MARKETING COMMON SHAREHOLDERS | $ | (860,699) | $ | (110,317) | $ | (918,666) | $ | (799,923) | |||
BASIC AND DILUTED LOSS PER SHARE | $ | (0.00) | S | (0.00) | $ | (0.00) | $ | (0.00) | |||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |||||||||||
BASIC AND DILUTED |
| 20,137,543,539 |
| 20,056,021,800 |
| 20,096,782,670 |
| 20,042,570,713 | |||
13
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 4 – RELATED PARTY TRANSACTIONS
Notes Payable
Notes payable to related parties were as follows at December 31, 2016 and June 30, 2016:
December 31, | June 30, | |||||
| 2016 |
| 2016 | |||
Note payable, interest at 12% per annum, secured by essentially all assets of the Company, due July 31, 2017. The lender is Temple CB LLC (“Temple”), a limited liability company controlled by Jay Hooper, the Company’s President and majority shareholder | $ | 562,422 | $ | 531,975 | ||
Note payable to Jay Hooper, due on demand, interest at 4% per annum |
| 10,000 |
| 10,000 | ||
| 572,422 | 541,975 | ||||
Less: current portion |
| (572,422) |
| (10,000) | ||
Notes payable, non-current portion | $ | -- | $ | 531,975 |
Advances
As of December 31, 2016 and June 30, 2016, $34,977 was due to the Company’s President and majority shareholder, Mr. Jay Hooper, for advances made to the Company to pay for operating expenses. The advances are non-interest bearing and are due on demand.
Lease Obligation
Through June 30, 2016, the Company, through its subsidiary, Crown Laboratory Inc., leased a warehouse in El Monte, California. The warehouse is owned by Temple CB LLC, (“Temple CB”), a single member limited liability company owned by the Company’s President and majority shareholder. In October 2016, the Company and Temple CB agreed to terminate the lease effective as of July 1, 2016. The Company ceased using the premises prior to July 1, 2016.
The lease was an operating lease and contained escalating rent payments and a period of free rent. The Company recognized rent expense on a straight-line basis over the entire lease period. During the three and six months ended December 31, 2015, the Company recorded $147,692 and $295,385 of rent expense, respectively. During the three and six months ended December 31, 2016, no rent expense was recorded relating to the lease agreement. As of December 31, 2016 and June 30, 2016, the Company owed $120,000 under this lease obligation.
As of June 30, 2016, the Company recorded a deferred lease obligation of $636,154. During the six months ended December 31, 2016, relating to the termination of the lease agreement, the Company recorded a gain on the termination of the deferred lease obligation of $636,154. As the deferred lease obligation was to a related party, the Company recorded the gain as a contribution to Additional Paid-in Capital on the December 31, 2016 Condensed Consolidated Statement of Shareholders’ Deficit.
During the six months ended December 31, 2016, the Company rented office and warehouse space from a third party company on a month-to-month basis. Rent expense for the six months was $27,786.
Due to Related Party
During the three and six months ended December 31, 2016, the Company used contract labor services provided by Temple CB totaling $9,400 and $14,400, respectively. As of June 30, 2016, a total of $5,600 was owed to Temple CB. Total payments made to Temple CB for the services during the three and six months ended December 31, 2016 were $10,000 and $20,000, respectively. There were no amounts owed to Temple CB as of December 31, 2016. The Company did not use contract labor services provided by Temple CB during the six months ended December 31, 2015.
14
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 5 – SHORT-TERM LOANS PAYABLE
During the six months ended December 31, 2016, the Company borrowed $59,250 from three individuals and a corporation. The loans are interest free, are unsecured and are due on demand. During the six months ended December 31, 2016, $49,250 of the loans was repaid. The total amount outstanding relating to these loans at December 31, 206 was $10,000.
NOTE 6 – CONVERTIBLE, REDEEMABLE PREFERRED STOCK
During the year ended June 30, 2016, the Company’s Board of Directors authorized the creation of a series of preferred stock consisting of 1,000,000 shares designated as Series A Preferred Stock (the “Series A”). The Series A is entitled to a dividend of 4%, when and as declared, and is entitled to a liquidation preference of $1 per share plus unpaid dividends. The Series A is redeemable at the option of the Company at any time, in whole or in part, at a price of $1.00 per share, plus 4% per annum thereupon from the date of issuance (the “Stated Value”). In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the Series A shall be entitled to a preferential amount equal to the Stated Value, prior to the holders of common stock receiving any distribution. Each share of Series A is automatically converted on the Conversion Date into a number of shares of common stock of the Company at the initial conversion rate (the “Conversion Rate”), which shall be the Stated Value as of the date of conversion divided by the Market Price. The Market Price for purposes of this Section 5 shall be equal to the average closing sales price of the Common Stock over the 5 previous trading days.
The Series A is also subject to adjustments to the Conversion Rate. If the common stock issuable on conversion of the Series A is changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares provided for above), the holders of the Series A shall, upon its conversion, be entitled to receive, in lieu of the common stock which the holders would have become entitled to receive but for such change, a number of shares of such other class or classes of stock that would have been subject to receipt by the holders if they had exercised their rights of conversion of the Series A immediately before that change.
In August 2016, the Company filed an amendment to its Articles of Incorporation to increase the number of authorized shares of Series A Preferred Stock from 1,000,000 to 10,000,000.
In October 2016, the holder of the Company’s 500,000 shares of outstanding Series A preferred stock, Temple CB, presented a Notice of Conversion to the Company, which obligated the Company to issue 80,000,000 shares of its common stock to Temple CB in exchange for the 500,000 shares of the preferred stock. The conversion rate was the stated value of $1.00 per share, plus 4% per annum, divided by the closing sales price on the five trading days prior to the date of the notice.
There were no preferred shares outstanding as of December 31, 2016.
NOTE 7 – SHAREHOLDERS’ DEFICIT
Effective July 1, 2016, the Company agreed to terminate its lease agreement with Temple CB (see Note 3). During the six months ended December 31, 2016, relating to the termination of the lease agreement, the Company recorded a gain on the termination of the deferred lease obligation of $636,154. As the deferred lease obligation was to a related party (Temple CB), the Company recorded the gain as a contribution to Additional Paid-in Capital on the December 31, 2016 condensed Consolidated Statement of Shareholders’ Deficit.
In July 2016, the Company entered into a settlement agreement with a party who had received 75,000,000 shares under the Company’s Form S-8. The agreement provides for the return of these shares upon payment of $17,500 to the consultant. The payment has not yet been made and the share certificate is in escrow pending payment.
In June 2016, the Company entered into an agreement with an individual under which the Company issued 100,000,000 shares of its common stock to the individual in October 2016. The value of the shares on the date of issuance was $670,000 and was recorded as stock based compensation.
15
CROWN MARKETING AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015
NOTE 8 – NON-CONTROLLING INTEREST
During 2015, the Company entered into a joint venture to create Crown Mobile. The Company owned 50% of the joint venture while two other owners owned 35% and 15%, respectively. Based on the authoritative guidance of the FASB on consolidation, the Company determined it should include Crown Mobile in its consolidated financial statements as a subsidiary since the Company had a controlling financial interest and directed the operating activities of Crown Mobile. The non-controlling interest represents the minority stockholders’ share of 50% of the equity of Crown Mobile. During the three and six months ended December 31, 2015, the non-controlling interest’s share of the loss of Crown Mobile was $4,673 and $8,088, respectively.
On December 15, 2015, the Board of Directors of the Company approved the sale of the Company’s interest in Crown Mobile for $25,000, which approximated the Company’s basis in Crown Mobile on that date.
NOTE 9 –SUBSEQUENT EVENTS
On January 19, 2017, the Company’s majority shareholder, Mr. Jay Hooper, sold his 16,155,746,000 shares to an investor group. A change of control took place effective as of that date.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statement Notice
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Crown Marketing, (“we”, “us”, “our” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
History and Organization
Crown Marketing is a Wyoming corporation (the "Company"). Pursuant to an Agreement and Plan of Reorganization dated December 2, 2013, the Company acquired all of the common stock of Okra Energy, Inc., a California corporation that was subscribed for on December 2, 2013 and then incorporated on December 18, 2013, in exchange for 16,155,746,000 shares of Common Stock of the Company (the "Common Stock") at the closing of the Agreement on December 3, 2013. Immediately prior to the closing, there were approximately 3,825,275,800 shares of Common Stock outstanding. After the closing, the beneficial owner of Okra Energy, Inc. shareholder, Jay Hooper, owned approximately 98.8% of the outstanding shares of common stock of the Company. The transaction was accounted for as a reverse merger (recapitalization) with Okra Energy, Inc. deemed to be the accounting acquirer and the Company deemed to be the legal acquirer. The financial statements presented herein are those of the accounting acquirer. The Company subsequently changed its name from Crown Marketing to Okra, Inc., but later changed the name of the Company back to Crown Marketing.
Concurrently with the merger, Jay Hooper was appointed as the sole director and President of the Company.
On January 19, 2017, the Company’s majority shareholder sold his shares to an investor group and the Company ceased its operations. Going forward, the Company’s operations will be determined by the new investor group. As such, the Company has accounted for all of its assets, liabilities and results of operations as discontinued operations as of December 31, 2016.
Overview of Business
Subsequent to December 31, 2016, the Company ceased its operations relating to the sales of consumer products. Effective January 19, 2017, the Company, under its new ownership and management team, will implement new operations.
17
Critical Accounting Policies and Estimates
Revenues
During the six months ended December 31, 2016, the Company’s revenues partly related to consignment sales. In the fourth quarter of fiscal 2016, the Company entered into agreements with certain of its vendors in which the Company agreed to sell the vendor’s products on a consignment basis. The Company accounts for the revenues on a net basis based on the guidance of ASC 605-45, as the Company acts as an agent under the agreements. The Company recognizes revenue under these consignment agreements when they ship the vendor’s products to their customers and recognize a 2.5% fee, per the agreements, on the date of shipment. The gross and net sales relating to the agreements during the three months ended December 31, 2016 were $130,000 and $3,250, respectively. The gross and net sales relating to the agreements during the six months ended December 31, 2016 were $513,027 and $12,826, respectively. There was no consignment sales during the three and six months ended December 31, 2015.
On product sales, primarily relating to scooter parts and other consumer products, the Company recognizes revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the price is fixed or determinable; and (iv) collectability is reasonably assured. Revenue is recognized for hardware product sales upon transfer of title and risk of loss to the customer. We record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on contractual return rights, historical sales returns, analysis of credit memo data and other factors known at the time. If actual future returns and pricing adjustments differ from past experience and our estimates, adjustments to revenue reserves may be required.
During the three months ended December 31, 2016, the Company entered into an agreement to develop an app for a customer. The Company hired a third party developer to develop the app. The total amount paid by the customer during the three months ended December 31, 2016 was $35,000. The amount paid by the customer was recorded as deferred revenue at December 31, 2016, as the app was not completed until January 2017. During the three months ended December 31, 2016, the Company paid the third party developer $16,690, which was recorded as a prepaid expense at December 31, 2016.
Effective January 1, 2017, all of the Company’s operations generating these sales became discontinued operations (see Note 3).
Estimates
The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others, the fair value of shares of common stock issued for services. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.
Recent Accounting Pronouncements
See Footnote 2 of the financial statements for a discussion of recently issued accounting standards.
Results of Operations
18
Results of Operations for the three months ended December 31, 2016 compared to the three months ended December 31, 2015.
There was no revenue, cost of sales or operating expenses from continuing operations for the three months ended December 31, 2016 and 2015. Our net loss for the three months ended December 31, 2016 was $860,699, compared to $114,990 for the three months ended December 31, 2015. The primary reason for the increase in the net loss in 2016 was the recording of $670,000 of stock based compensation relating to the issuance of 100 million shares to an individual.
Results of Operations for the six months ended December 31, 2016 compared to the six months ended December 31, 2015.
There was no revenue, cost of sales or operating expenses from continuing operations for the six months ended December 31, 2016 and 2015. Our net loss for the six months ended December 31, 2016 was $918,666, compared to $808,011 for the six months ended December 31, 2015. The primary reason for the increase in the net loss in 2016 was the recording of stock based compensation of $670,000, while during the six months ended December 31, 2015, the Company issued common stock for services in the amount of $525,000.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company has incurred recurring net losses. For the six months ended December 31, 2016, the Company recorded a net loss of $918,666, used cash to fund operating activities of $10,612, and at December 31, 2016, had a shareholders’ deficit of $705,777. These factors create substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
During the six months ended December 31, 2016, the Company’s majority shareholder sold the majority of his shares to an investor group. The new management’s plans to continue as a going concern revolve around its ability to achieve profitable operations, as well as raise necessary capital to pay ongoing general and administrative expenses of the Company. The ability of the Company to continue as a going concern is dependent on securing additional sources of capital and the success of the Company's plan. There is no assurance that the Company will be successful in raising the additional capital or in achieving profitable operations.
Our cash needs for the six months ended December 31, 2016 were primarily met by short-term loans payable of $59,250, plus a note payable of $500,000 from a company owned by our majority shareholder during the year ended June 30, 2016. As of December 31, 2016, we had a cash balance of $4,057. Our new majority shareholders will need to provide all of our working capital until at least June 30, 2017.
Primarily as a result of our recurring losses and our lack of liquidity, we received a report from our independent registered public accounting firm for our financial statements for the year ended June 30, 2016 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern.
For the six months ended December 31, 2016
Cash flows from operating activities
There were no cash flows from continuing operating activities for the six months ended December 31, 2016.
Cash flows from investing activities
There were no cash flows from continuing investing activities for the six months ended December 31, 2016.
Cash flows from financing activities
There were no cash flows from continuing financing activities for the six months ended December 31, 2016.
Financial Position
As of December 31, 2016, we had $4,057 in cash, negative working capital of $705,777 and an accumulated deficit of $3,061,931.
As of June 30, 2016, we had $4,699 in cash, working capital of $74,864 and an accumulated deficit of $2,143,265.
As of December 31, 2016 and June 30, 2016, $34,977 was due to the Company’s President and majority shareholder, Mr. Jay Hooper, for advances made to the Company to pay for operating expenses. The advances are non-interest bearing and are due on demand.
As of December 31, 2016 and June 30, 2015, a loan of $10,000 due to Mr. Hooper is due on demand and bears interest at 4%.
In August 2015, the lessor of the Company’s premises, which is also a related party, loaned $500,000 to the Company. The loan accrues interest at 12% per annum and is secured by essentially all assets of the Company. The unpaid principal and all accrued but unpaid interest is due and payable on or before July 31, 2017. As of December 31, 2016, $500,000 of principal and $62,422 of accrued interest was owed on the note.
During the six months ended December 31, 2016, the Company borrowed $59,250 from three individuals and a corporation. The loans are interest free, are unsecured and are due on demand. During the six months ended December 31, 2016, $49,250 of the loans was repaid. The total amount outstanding relating to these loans at December 31, 206 was $10,000.
Contractual Obligations and Off-Balance Sheet Arrangements
We do not have any contractual obligations or off balance sheet arrangements.
19
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our Chief Executive Officer as of the end of the period covered by this report, our Chief Executive Officer concluded that our disclosure controls and procedures have not been effective as a result of a weakness in the design of internal control over financial reporting identified below.
As used herein, “disclosure controls and procedures” mean controls and other procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) under the Securities Exchange Act of 1934. Our Chief Executive Officer/Chief Accounting Officer conducted an evaluation of the effectiveness of our control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO 2013”). Based on management’s evaluation under the framework, management has concluded that our internal control over financial reporting was not effective as of December 31, 2016.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting during the period ended December 31, 2016 that have materially affected or are reasonably likely to materially affect our internal controls.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to or otherwise involved in any legal proceedings.
In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
Item 1A. Risk Factors.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In October 2016, the holder of the Company’s 500,000 shares of outstanding Series A preferred stock, Temple CB, presented a Notice of Conversion to the Company, which obligated the Company to issue 80,000,000 shares of its common stock to Temple CB in exchange for the 500,000 shares of the preferred stock.
In June 2016, the Company entered into an agreement with an individual under which the Company issued 100,000,000 shares of its common stock to the individual in October 2016.
Item 3. Defaults Upon Senior Securities.
There have been no events which are required to be reported under this Item.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
20
Item 6. Exhibits and Financial Statement Schedules
31.1
Certification of CEO and CFO. Filed herewith.
32.1
Certification pursuant to 18 U.S.C. Section 1350 of CEO and CFO. Filed herewith.
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Definition
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are furnished and not filed.
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.
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| CROWN MARKETING | |
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Dated: February 21, 2017 | By: | /s/ Jay Hooper |
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| Jay Hooper |
|
| President and Chief Financial Officer (chief financial and accounting officer and duly authorized officer) |
21