ASTIKA HOLDINGS INC. - Annual Report: 2017 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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[X]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2017
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OR
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ______________ to ______________________.
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Commission file number: 000-54855
Astika
Holdings, Inc.
(Exact name of registrant as specified in its charter)
Florida
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27-4601693
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Level 1, 725 Rosebank Road
Avondale,
Auckland, 1348, New Zealand
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (64) 9 929 0502
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common
Stock, par value $0.001 per share
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes [ ] No [X]
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 [ ] No [X]
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 [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerate
filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company”, in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
(Do not check if smaller reporting company)
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Smaller reporting company [X]
Emerging growth company [X]
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes [ X ] No [ ]
As of June 30, 2017, the aggregate market value of the shares of the registrant's common stock held by
non-affiliates (based upon close sale price of such shares as reported on the OTC Marketplace), was $32,733.97
The number of shares outstanding of the issuer's common stock, as of April 15, 2019 was 29,890,066.
Astika Holdings, Inc.
FORM 10-K
For The Fiscal Year Ended December 31, 2017
TABLE OF CONTENTS
PART I
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1
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Item 1. Business.
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2 |
Item 1A. Risk Factors.
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2
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Item 1B. Unresolved Staff
Comments.
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2
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Item 2. Properties.
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2
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Item 3. Legal Proceedings.
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2
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Item 4. Mine Safety Disclosures
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2
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PART II
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3
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Item 5. Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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3
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Item 6. Selected Financial Data.
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3
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Item 7. Management’s Discussion
And Analysis Of Financial Condition And Results Of Operations
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3
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Item 7A. Quantitative and
Qualitative Disclosures about Market Risk.
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Item 8. Financial Statements and
Supplementary Data.
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Item 9. Changes In and
Disagreements with Accountants on Accounting and Financial Disclosure.
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24
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Item 9A. Controls and
Procedures.
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24
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Item 9B. Other Information.
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26
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PART III
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27
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Item 10. Directors, Executive
Officers and Corporate Governance.
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27
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Item 11. Executive Compensation.
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30
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Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters.
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33 |
Item 13. Certain Relationships
and Related Transactions, and Director Independence.
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34 |
Item 14. Principal Accountant
Fees and Services.
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34 |
Item 15. Exhibits.
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35 |
SIGNATURES
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36 |
Explanatory Note
In this Annual Report on Form 10-K, Astika Holdings, Inc. is sometimes referred to as the
“Company”, “we”, “our”, “us” or “registrant” and U.S. Securities and Exchange Commission is sometimes referred to as the “SEC”.
Our Company
Astika Holdings, Inc. is refocusing and preparing to relaunch the Company through one or more
strategic acquisitions in the textile, service, agricultural and industrial sectors in Asia and New Zealand. We were incorporated under the laws of the State of Florida on January 13, 2011. On September 26, 2014, the Company dissolved its
subsidiary Astika Music Entertainment, Inc. The dissolution was in response to the change in the nature of business operations. For the year ended December 31, 2017, we generated $0 revenues and had a net loss of $269,600.
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.
Our principal executive offices are located at Level 1, 725 Rosebank Road, Avondale,
Auckland, 1348, New Zealand. Our telephone number is (64) 9 929 0502. We were incorporated under the laws of the State of Florida on January 13, 2011. Our fiscal year end is December 31.
Current Operations
We ceased providing services to customers and other activities that generate revenue.
Significant costs after this period consisted primarily of audit and legal costs. During the fiscal year ended December 31, 2017, we did not conduct business operations except to evaluate potential lines of business.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will
continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company currently has no operations and as of December 31, 2017 had a shareholders deficit of
$69,200. The Company intends to find a merger target in the form of an operating entity. The Company cannot be certain that it will be successful in this strategy.
These factors, among others, raise substantial doubt about the Company’s ability to continue
as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
1
Research and Development
We have not incurred any research and development costs in the fiscal years ended December
31, 2017 or 2016.
Personnel
As of April 15, 2019, we employed two persons on a part-time basis. None of our employees is
subject to a collective bargaining agreement.
Intellectual Property
We currently have not obtained any copyrights, patents or trademarks. We do not anticipate
filing any copyright or trademark applications related to any assets over the next 12 months.
Government Regulation
We are required to comply with all regulations, rules and directives of governmental
authorities and agencies in any jurisdiction which we would conduct activities in the future. As of now there are no required governmental approvals present that we need approval from or any existing government regulation on our business.
Not applicable to smaller reporting companies.
None.
Our executive offices are located at Level 1, 725 Rosebank Road, Avondale, Auckland, 1348,
New Zealand. The Company does not own or rent property. The office space is provided by an officer at no charge. We believe that this space is presently adequate for our needs.
We are not a party to any legal proceedings, nor are we aware of any threatened litigation
whatsoever.
Not applicable to smaller reporting companies.
2
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is currently listed on the OTC Bulletin Board under the symbol “ASKH”.
Holders of Record
As of December 31, 2017, and
April 9, 2019, respectively, there were 3 and 3 shareholders of record of the Company’s common stock.
Dividend Policy
We have never declared or paid any cash dividends on our common stock and preferred stock. We do not
anticipate paying any cash dividends on our common stock and preferred stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance our operations, and to expand our business. Subject to the rights of holders
of preferred stock, any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, operating results, capital requirements, limitations under Florida law and
other factors that our board of directors considers appropriate.
Recent Sales of Unregistered Securities
None.
Recent Sales of Registered Securities
None.
Not applicable to smaller reporting companies.
The following discussion and analysis should be read in conjunction with our financial statements,
including the notes thereto, appearing in this Form 10-K 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.
3
Overview
Astika Holdings, Inc. is refocusing and preparing to relaunch the Company through a variety of strategic
acquisitions in the textile, service, agricultural, and industrial sectors to complement and capture the next wave of growth companies from Asia and New Zealand. We were incorporated under the laws of the State of Florida on January 13, 2011.
Results of Operations for the Year Ended December 31, 2017 Compared to the Year Ended
December 31, 2016
Revenues.
The Company did not have any revenue for the years ended December 31, 2017 and
2016. The lack of revenue was due to a change in the business plans of the Company.
General and Administrative Expenses.
The Company has had nominal operations and only incurred expenses relating to being a public reporting
company, and seeking for acquisition and financing, including professional service fees for preparing our SEC reports, transfer agent fees, and consulting fees for merger and acquisition and investment advisory services. General and administrative
expenses for the year ended December 31, 2017 were $158,477, as compared to $18,381 for the year ended December 31, 2016. The significant increase in general and administrative expenses was primarily due to the increase of accounting, legal and
consulting fees related to the Company’s SEC reports and consulting expenses associated with the Company’s acquisition and financing activities.
During the year ended December 31, 2017, we had actively worked on the preparation for acquisition and
sought for new financing sources. We engaged a consulting firm to help raising capital for our acquisition, operation, and growth. For the year ended December 31, 2017, the increase in general and administrative expense were primarily due to the
higher expenditure associated with such acquisition and financial activities and additional SEC reports.
In December 2017, the Company issued 1,210,000 shares of its Series B
convertible preferred stock and raised total gross proceeds of $508,200. A total issuing cost of $306,391 was recognized as deduction to equity (Additional Paid-in Capital) and was not included in general and
administrative expenses.
Loss on change in fair value of derivative.
During the years ended December 31, 2017 and 2016, $82,872 and $3,122 was recorded as a loss on
mark-to-market of the conversion options, respectively. The Company estimated the fair value of the derivative liabilities using the Black-Scholes option pricing model.
Liquidity and Capital Resources
The Company has had only nominal operations and does not have any cash generated from business
operations. We funded our operating expenses by issuing notes to related and unrelated parties and borrowing loans from our related parties. In addition, during the year ended December 31, 2017, we issued convertible preferred stock for gross
proceeds of $508,200. Our plan is to obtain financing from various investors and complete our acquisition project.
We measure our liquidity in a number of ways, including the following:
4
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As of
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As of
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||||||
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December 31,
2017
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December 31,
2016
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||||||
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||||||||
Cash
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$
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-
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$
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-
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Prepaid Expenses
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42,101
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-
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Due from related party
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-
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45,264
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Working Capital (Deficit)
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(69,200
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)
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(164,632
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)
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Total Current liabilities
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$
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111,301
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$
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164,632
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Net Cash Used in Operating Activities
Net cash used in operating activities was $194,044 for the year ended December 31, 2017, which was an
increase of 194,044 from $0 net cash used in operating activities for the year ended December 31, 2016. The increase was primarily due to the increase in operating loss.
We experienced no cash flow from operating activities for the year ended December 31, 2016 due to cash
used to fund a net loss of $23,534, adjusted for non-cash expenses related to loss on derivative, and decrease in prepaid expense, as well as the increase in accounts payable for legal and accounting services to being a public reporting company.
Net Cash Used in Investing Activities
We experienced no cash flow from investing activities for year ended December 31, 2017 and 2016.
Net Cash Provided by Financing Activities
During the year ended December 31, 2017, we paid back $142,779 of earlier loans from
our related parties and borrowed new loans of totaling $135,015 from our related parties. We also issued 1,210,000 shares of Series B convertible preferred stock for net proceeds of $201,808.
Availability of Additional Funds
Based on our working capital deficit as of December 31, 2017, we will need additional equity and/or debt
financing to continue our operations during the next 12 months. See “Description of Business”.
Critical Accounting Policies and Estimates
Our financial statements and accompanying notes have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles 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 the fair value of our stock, and the valuation allowance relating to the Company’s deferred tax assets.
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.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with United States generally accepted accounting principles 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.
5
We regularly evaluate the accounting policies and estimates that we use to prepare our financial
statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results
could differ from those estimates made by management.
Cash and Cash Equivalents
We consider all highly liquid debt instruments with original maturities of three months or less to be cash
equivalents. At December 31, 2017, we have no cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Share Based Payments
We recognize compensation cost for stock-based awards to employees in accordance with ASC Topic 718, over
the requisite service period for each separately vesting tranche, as if multiple awards were granted. Compensation cost is based on grant-date fair value using quoted market prices for our common stock. We recognize compensation cost for
stock-based awards to nonemployees in accordance with ASC Topic 505.
Earnings (Loss) Per Share
The Company computes earnings per share in accordance with ASC 260, “Earnings Per Share”. Under the
provisions of ASC 260, basic earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net
income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. There were no potentially dilutive common shares outstanding during the period.
Income Taxes
The Company accounts for income taxes as outlined in ASC 740, “Income Taxes”. Under the asset and
liability method of ASC 740, deferred tax assets and liabilities are recognized for the estimated 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 in effect for the year in which those temporary differences are expected to be recovered or settled.
Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to
measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to
measure fair value:
Level 1 - Level 1 applies to assets or liabilities for which there are quoted prices in active markets for
identical assets or liabilities.
Level 2 - Level 2 applies to assets or liabilities for which there are inputs other than quoted prices
that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
6
Level 3 - Level 3 applies to assets or liabilities for which there are unobservable inputs to the
valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The carrying values of cash, accounts payable, and accrued liabilities approximate fair value. Pursuant to
ASC 820 and 825, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values
because of their nature and respective maturity dates or durations.
Recently Issued Accounting Pronouncements
In January 2017, FASB issued ASU 2017-01, "Business Combinations (Topic 805) - Clarifying the Definition
of a Business". The Board is issuing the amendments in this ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or
disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments in this ASU affect all reporting entities that must determine whether
they have acquired or sold a business. Public business entities should apply the amendments in this ASU to annual periods beginning after December 15, 2017, including interim periods within those periods. However, early application of the
amendments in this ASU if 1) for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made
available for issuance, or 2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported
in financials. The Company will evaluate the potential impact of adopting this new standard on its financial statements and related disclosures when the acquisition plan is executed in future.
In May 10, 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718) - Scope of
Modification. ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting
conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. Regardless of whether the change to the terms or conditions of the award requires modification accounting, the
existing disclosure requirements and other aspects of GAAP associated with modifications, such as earnings per share, continue to apply. The guidance is effective prospectively for all companies for annual periods beginning on or after December 15,
2017. Early adoption is permitted. The Company is evaluating the potential impact of adopting this new standard on its financial statements and related disclosures and believes that the impact of recently issued standards that are not yet effective
will not have a material impact on its financial position or results of operations upon adoption.
In December 2017, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No.
118 (the “Bulletin”), which provides accounting guidance regarding accounting for income taxes for the reporting period that includes the enactment of the Tax Act. The Bulletin provides guidance in those situations where the accounting for certain
income tax effects of the Tax Act will be incomplete by the time financial statements are issued for the reporting period that includes the enactment date. For those elements of the Tax Act that cannot be reasonably The SEC has provided in the
Bulletin that in situations where the accounting is incomplete for certain effects of the Tax Act, a measurement period which begins in the reporting period that includes the enactment of the Tax Act and ends when the entity has obtained, prepared
and analyzed the information is needed in order to complete the accounting requirements. The measurement period shall not exceed one year from enactment. estimated, no effect will be recorded. The Company is evaluating the potential impact of
adopting this new standard on its financial statements and related disclosures and believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations
upon adoption.
Off Balance Sheet Arrangements
As of December 31, 2017, we had no off-balance sheet arrangements.
Material Commitments
There were no material commitments for the year ended December 31, 2017.
Purchase of Furniture and Equipment
There were no purchases of computers and any other equipment for the year ended December 31, 2017.
7
We are not subject to risks related to foreign currency exchange rate fluctuations. Our functional
currency is the United States dollar. We do not transact our business in other currencies. As a result, we are not subject to exposure from movements in foreign currency exchange rates. We do not use derivative financial instruments for speculative
trading purposes.
8
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Astika Holdings Inc.
Astika Holdings Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Astika Holdings Inc. (the “Company”) as of December
31, 2017, and the related statements of operations, changes in stockholders’ deficits and statement of cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial position of Astika Holdings Inc. as of December 31, 2017, and the results of their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
Emphasis of Matter - Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going
concern. As discussed in Note 2 to the financial statements, although the Company has limited operations, it has not yet to attain profitability. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in
regard to these matters is also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of
internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Yu Certified Public Accountant PC
We have served as the Company's auditor since 2019.
New York, New York
April 11, 2019
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Astika Holdings, Inc.
We have audited the accompanying balance sheet of Astika Holdings, Inc. (the “Company”) as of December 31,
2016, and the related statements of operations, changes in shareholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Astika Holdings, Inc. as of December 31, 2016, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a
going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency and has not yet established an ongoing source of revenue, which raises substantial doubt
about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/
MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
July 28, 2017
10
ASTIKA HOLDINGS, INC.
BALANCE SHEETS
December 30,
2017
|
December 30,
2016
|
|||||||
ASSETS
|
||||||||
Cash
|
$
|
-
|
$
|
-
|
||||
Prepaid expenses
|
42,101
|
-
|
||||||
TOTAL ASSETS
|
$
|
42,101
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$
|
-
|
||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
||||||||
Current Liabilities
|
||||||||
Accounts payable and accrued expenses
|
$
|
70,282
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$
|
63,750
|
||||
Loan payable and accrued interest
|
3,519
|
3,450
|
||||||
Due to related party
|
37,500
|
45,264
|
||||||
Convertible note and accrued interest
|
-
|
28,821
|
||||||
Derivative liability
|
-
|
23,347
|
||||||
Total Current Liabilities
|
111,301
|
164,632
|
||||||
Shareholders' Deficit
|
||||||||
Preferred Stock: 10,000,000 shares authorized; par value $0.001; 2,090,000 and zero
issued and outstanding as of December 31, 2017 and December 31, 2016
|
2,090
|
-
|
||||||
Common Stock: 140,000,000 shares authorized; par value $0.001; 29,890,066 and
11,626,857 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively
|
29,890
|
11,627
|
||||||
Additional paid-in capital less Pref B issuing costs
|
471,595
|
126,916
|
||||||
Accumulated deficit
|
(572,775
|
)
|
(303,175
|
)
|
||||
Total Shareholders’ Deficit
|
(69,200
|
)
|
(164,632
|
)
|
||||
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
$
|
42,101
|
$
|
-
|
The accompanying notes are an integral part of these financial statements.
11
ASTIKA HOLDINGS, INC.
STATEMENTS OF OPERATIONS
For The Years Ended
|
||||||||
December 30,
2017
|
December 30,
2016
|
|||||||
REVENUE
|
||||||||
Revenue
|
$
|
-
|
$
|
-
|
||||
TOTAL REVENUE
|
-
|
-
|
||||||
OPERATING EXPENSES
|
||||||||
General and administrative
|
158,477
|
18,381
|
||||||
Total Operating Expenses
|
158,477
|
18,381
|
||||||
OPERATING LOSS
|
(158,477
|
)
|
(18,381
|
)
|
||||
OTHER INCOME (EXPENSE)
|
||||||||
Interest expense, net
|
(8,897
|
)
|
(2,031
|
)
|
||||
Loss on change in fair value of derivative
|
(102,226
|
)
|
(3,122
|
)
|
||||
Total Other Income (Expense)
|
(111,123
|
)
|
(5,153
|
)
|
||||
NET LOSS
|
$
|
(269,600
|
)
|
$
|
(23,534
|
)
|
||
BASIC AND DILUTED NET LOSS PER COMMON SHARE |
$
|
(0.02
|
)
|
$
|
(0.00
|
)
|
||
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
16,721,721
|
11,626,857
|
The accompanying notes are an integral part of these financial statements.
12
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
Preferred Stock
|
Common Stock
|
Additional
Paid In
|
Accumulated
|
Total
Shareholders’
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital | (Deficit) | Equity | ||||||||||||||||||||||
Balance at December 31, 2015
|
11,626,857
|
$
|
11,627
|
$
|
126,916
|
$
|
(279,641
|
)
|
$
|
(141,098
|
)
|
|||||||||||||||||
Net loss
|
|
(23,534
|
)
|
|
(23,534
|
)
|
||||||||||||||||||||||
Balance at December 31, 2016
|
11,626,857
|
$
|
11,627
|
$
|
126,916
|
$
|
(303,175
|
)
|
$
|
(164,632
|
)
|
|||||||||||||||||
Shares issued for debt conversion 3/21/17
|
572,476
|
|
572
|
2,262
|
|
2,834
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
-
|
|
-
|
-
|
|
-
|
4,278
|
|
-
|
|
4,278
|
|||||||||||||||||
Shares issued for debt conversion 6/8/17
|
603,038
|
|
603
|
425
|
|
1,028
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
23,197
|
|
23,197
|
|||||||||||||||||||||||||
Shares issued for debt conversion 6/13/17
|
638,926
|
|
639
|
450
|
|
1,089
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
6,921
|
|
6,921
|
|||||||||||||||||||||||||
Shares issued for debt conversion 6/27/17
|
670,334
|
|
670
|
1,173
|
|
1,843
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
4,135
|
|
4,135
|
|||||||||||||||||||||||||
Shares issued for debt conversion 7/18/17
|
701,519
|
|
702
|
495
|
|
1,197
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
1,837
|
|
1,837
|
|||||||||||||||||||||||||
Shares issued for debt conversion 7/24/17
|
735,903
|
|
736
|
478
|
|
1,214
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
1,482
|
|
1,482
|
|||||||||||||||||||||||||
Shares issued for debt conversion 8/3/17
|
775,636
|
|
776
|
504
|
|
1,280
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
4,649
|
|
4,649
|
|||||||||||||||||||||||||
Shares issued for debt conversion 8/18/17
|
812,860
|
|
813
|
528
|
|
1,341
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
3,202
|
|
3,202
|
|||||||||||||||||||||||||
Shares issued for debt conversion 8/25/17
|
852,841
|
|
853
|
789
|
|
1,642
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
1,790
|
|
1,790
|
|||||||||||||||||||||||||
Shares issued for debt conversion 8/31/17
|
897,810
|
|
898
|
337
|
|
1,235
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
1,810
|
|
1,810
|
|||||||||||||||||||||||||
Shares issued for debt conversion 9/13/17
|
941,854
|
|
942
|
353
|
|
1,295
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
3,460
|
|
3,460
|
|||||||||||||||||||||||||
Shares issued for debt conversion 9/20/17
|
989,403
|
|
989
|
371
|
|
1,360
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
2,705
|
|
2,705
|
|||||||||||||||||||||||||
Shares issued for debt conversion 10/3/17
|
1,038,870
|
|
1,039
|
561
|
|
1,600
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
2,171
|
|
2,171
|
|||||||||||||||||||||||||
Shares issued for debt conversion 10/16/17
|
1,090,032
|
|
1,090
|
589
|
|
1,679
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
2,243
|
|
2,243
|
|||||||||||||||||||||||||
Shares issued for debt conversion 10/19/17
|
1,141,941
|
|
1,142
|
617
|
|
1,759
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
2,011
|
|
2,011
|
|||||||||||||||||||||||||
Shares issued for debt conversion 11/6/17
|
1,201,538
|
|
1,202
|
648
|
|
1,850
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
4,218
|
|
4,218
|
|||||||||||||||||||||||||
Shares issued for debt conversion 11/28/17
|
1,262,260
|
|
1,262
|
2,417
|
|
3,679
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
2,108
|
|
2,108
|
|||||||||||||||||||||||||
Shares issued for debt conversion 12/6/17
|
1,326,373
|
|
1,326
|
2,540
|
|
3,866
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
3,576
|
|
3,576
|
|||||||||||||||||||||||||
Pref B Shares issued for Cash 1.210mil @$0.30 & 380K@$0.40 on 12/14/17 less
costs
|
1,590,000
|
|
1,590
|
40,219
|
|
41,809
|
||||||||||||||||||||||
Pref B Shares issued for Services @ FV $0.32 on 12/14/17
|
500,000
|
|
500
|
159,500
|
|
160,000
|
||||||||||||||||||||||
Shares issued for debt conversion 12/22/17
|
2,009,595
|
|
2,009
|
3,849
|
|
5,858
|
||||||||||||||||||||||
Resolution of derivative liabilities
|
7,276
|
|
7,276
|
|||||||||||||||||||||||||
Retirement of derivative upon final debt conversion
|
9,527
|
|
9,527
|
|||||||||||||||||||||||||
Gain/Loss from interest derivative additions
|
32,978
|
|
32,978
|
|||||||||||||||||||||||||
Net loss for the year
|
|
(269,600
|
)
|
|
(269,600
|
)
|
||||||||||||||||||||||
Balance at December 31, 2017
|
2,090,000
|
$
|
2,090
|
29,890,066
|
$
|
29,890
|
$
|
471,595
|
$
|
(572,775
|
)
|
$
|
(69,200
|
)
|
The accompanying notes are an integral part of these financial
statements.
13
ASTIKA HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended
|
||||||||
December 30,
2017
|
December 30,
2016
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss
|
$
|
(269,600
|
)
|
$
|
(23,534
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Loss on derivative
|
102,227
|
3,122
|
||||||
Changes in Operating assets & liabilities
|
||||||||
(Increase) decrease in prepaid expenses
|
(42,100
|
)
|
2,051
|
|||||
Increase (decrease) in accounts payable and accrued expenses
|
15,429
|
18,361
|
||||||
Net Cash Used by Operating Activities
|
(194,044
|
)
|
-
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Payback to related party
|
(142,779
|
)
|
-
|
|||||
Due to releted party
|
|
135,015
|
-
|
|||||
Preferred B shares issued for cash
|
201,808
|
-
|
||||||
Net cash provided by Financing Activities
|
194,044
|
-
|
||||||
NET INCREASE IN CASH
|
-
|
-
|
||||||
CASH AT BEGINNING OF PERIOD
|
-
|
-
|
||||||
CASH AT END OF PERIOD
|
$
|
-
|
$
|
-
|
||||
CASH PAID FOR:
|
||||||||
Interest
|
$
|
-
|
$
|
-
|
||||
Income taxes
|
-
|
-
|
||||||
NON-CASH INVESTING AND FINANCING ACTIVITIES
|
||||||||
Extinguishment of derivative to Additional Paid In Capital
|
$
|
125,574
|
$
|
-
|
||||
Common stock issued for convertible debt
|
37,648
|
-
|
||||||
Expense paid by related party on behalf of the company
|
-
|
23,945
|
||||||
Preferred B shares issued for services
|
$
|
160,000
|
$
|
-
|
The accompanying notes are an integral part of these financial
statements.
14
ASTIKA HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
NOTE 1 - BASIS OF PRESENTATION
Astika Holdings, Inc. (the “Company”, “we”, “us”, “our”), Astika Holdings, Inc., a Florida corporation,
is refocusing and preparing to relaunch the Company through a variety of strategic acquisitions in the textile, service, and industrial sectors to complement and capture the next wave of growth companies from Asia and New Zealand.
On September 26, 2014 the Company dissolved its subsidiary Astika Music Entertainment,
Inc. The dissolution was in response to the change in the nature of business operations.
NOTE 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 an accumulated deficit and a working capital deficit at December
31, 2017. 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.
In order to continue as a going concern, the Company will need, among other things, additional capital
resources. Management’s plans focus is on a variety of strategic acquisitions in service, agriculture and industrial companies to compliment and grow Astika Holdings, Inc.’s business. The Company is positioning to capture the next wave of growth
companies from Asia. As the centerpieces for Astika Holdings in Asia, the focus is on rapid economic growth and increased foreign investment sector companies which management believes is poised for accelerated economic growth with national
modernization. Astika’s planned focus is also on adding value through successful project development, efficient operations, and opportunistic acquisitions while maintaining a low risk profile through project diversification, astute financial
management and operating in secure jurisdictions. Management’s plan to obtain such resources for the Company include (i) obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses; (ii)
obtaining funding from outside sources through the sale of its debt and/or equity securities; and (iii) completing a merger with or acquisition of an existing operating company. However, management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 – SIGNIFICANT
ACCOUNTING POLICIES
Basis
of Presentation
The accompanying financial statements have been prepared by the Company. The Company’s financial
statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
Cash
and Cash Equivalents
The Company considers all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents. At December 31, 2017 and 2016, the Company has no cash equivalents.
Use
of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
15
Earnings
(Loss) Per Share
The Company computes earnings per share in accordance with ASC 260, “Earnings Per Share” (ASC 260).
Under the provisions of ASC 260, basic earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by
dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. The Company had net losses as of December 31, 2017 and 2016, as such, the diluted
earnings per share excludes all dilutive potential shares because their effect is anti-dilutive.
Stock-Based
Compensation
We recognize compensation cost for stock-based awards to employees in accordance with ASC Topic 718,
over the requisite service period for each separately vesting tranche, as if multiple awards were granted. Compensation cost is based on grant-date fair value using quoted market prices for our common stock. We recognize compensation cost for
stock-based awards to nonemployees in accordance with ASC Topic 505.
Income
Taxes
The Company accounts for income taxes as outlined in ASC 740, “Income Taxes”. Under the asset and
liability method of ASC 740, deferred tax assets and liabilities are recognized for the estimated 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 in effect for the year in which those temporary differences are expected to be recovered or settled.
Accounting
for Derivative Instruments
The Company accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” (ASC 815) and all derivative instruments are reflected
as either assets or liabilities at fair value in the balance sheet.
The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as
the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company's policy in estimating fair values is to first look at observable market prices for identical
assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit
spreads (including for the Company's liabilities), relying first on observable data from active markets. Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., depending on current market conditions.
Transaction costs are not included in the determination of fair value. When possible, the Company seeks to validate the model's output to market transactions. Depending on the availability of observable inputs and prices, different valuation
models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the
hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. Changes in fair value are recognized in the period incurred as either gains or losses.
ASC 820, “Fair Value Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It
establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
- Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
- Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for
identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by,
observable market data.
16
Level 3
- Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The carrying values of cash, accounts payable, and accrued liabilities approximate fair value. Pursuant
to ASC 820 and 825, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair
values because of their nature and respective maturity dates or durations.
The following table sets forth by level within the fair value hierarchy the Company's financial assets
and liabilities that are measured at fair value on a recurring basis:
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
December 31, 2017:
|
||||||||||||||||
Liabilities:
|
||||||||||||||||
Derivative financial instruments
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
-- |
||||||||
December 31, 2016:
|
||||||||||||||||
Liabilities:
|
||||||||||||||||
Derivative financial instruments
|
$
|
--
|
$
|
--
|
$
|
23,347
|
$
|
23,347
|
Recently
Issued Accounting Standards
In January 2017, FASB issued ASU 2017-01, "Business Combinations (Topic 805) - Clarifying the Definition
of a Business". The Board is issuing the amendments in this ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or
disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments in this ASU affect all reporting entities that must determine whether
they have acquired or sold a business. Public business entities should apply the amendments in this ASU to annual periods beginning after December 15, 2017, including interim periods within those periods. However, early application of the
amendments in this ASU if 1) for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made
available for issuance, or 2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported
in financials. The Company will evaluate the potential impact of adopting this new standard on its financial statements and related disclosures when the acquisition plan is executed in future.
In May 10, 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718) - Scope of
Modification. ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting
conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. Regardless of whether the change to the terms or conditions of the award requires modification accounting, the
existing disclosure requirements and other aspects of GAAP associated with modifications, such as earnings per share, continue to apply. The guidance is effective prospectively for all companies for annual periods beginning on or after December 15,
2017. Early adoption is permitted. The Company is evaluating the potential impact of adopting this new standard on its financial statements and related disclosures and believes that the impact of recently issued standards that are not yet effective
will not have a material impact on its financial position or results of operations upon adoption.
17
In December 2017, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No.
118 (the “Bulletin”), which provides accounting guidance regarding accounting for income taxes for the reporting period that includes the enactment of the Tax Act. The Bulletin provides guidance in those situations where the accounting for certain
income tax effects of the Tax Act will be incomplete by the time financial statements are issued for the reporting period that includes the enactment date. For those elements of the Tax Act that cannot be reasonably The SEC has provided in the Bulletin that in situations where the accounting is incomplete for certain effects of the Tax Act, a measurement period which begins in the reporting period that
includes the enactment of the Tax Act and ends when the entity has obtained, prepared and analyzed the information is needed in order to complete the accounting requirements. The measurement period shall not exceed one year from enactment.
estimated, no effect will be recorded. The Company is evaluating the potential impact of adopting this new standard on its financial statements and related disclosures and believes that the impact of recently issued standards that are not yet
effective will not have a material impact on its financial position or results of operations upon adoption.
NOTE 4 - CONVERTIBLE NOTE PAYABLE
During October 2014, the Company issued an 8.0% convertible debenture for $31,500 in cash.
The convertible debenture accrues interest at 8.0% per annum, is unsecured, due in one year from the date of issuance and is convertible into shares of the Company’s common stock after 180 days at the option of the holder at a rate equal to 55%
of the lowest trading price of the Company’s common stock out of the last 20 trading trades including the date of conversion.
The balance of the convertible debenture at December 31, 2016 was $24,500. The amount of
accrued interest due at December 31, 2016 was $4,321. Per the convertible agreement, upon an event of default, interest shall accrue at a default rate of 24% per annum or, if that rate is exorbitant or not permitted by current law, then at the
highest rate of interest permitted by law. As of December 31, 2016, the loan was in default.
On March 21, 2017, the Company issued 572,476 common shares in the conversion of $2,000
principal and $834 in interest due to LG Capital Funding, LLC at $0.00495 per share, as calculated per the loan agreement.
On June 8, 2017, the Company issued 603,038 common shares in the conversion of $700
principal and $328 in interest due to LG Capital Funding, LLC at $0.00171 per share, as calculated per the loan agreement.
On June 13, 2017, the Company issued 638,926 common shares in the conversion of $740
principal and $350 in interest due to LG Capital Funding, LLC at $0.00171 per share, as calculated per the loan agreement.
On June 27, 2017, the Company issued 670,334 common shares in the conversion of $1,245
principal and $598 in interest due to LG Capital Funding, LLC at $0.00275 per share, as calculated per the loan agreement.
On July 18, 2017, the Company issued 701,519 common shares in the conversion of $800
principal and $396 in interest due to LG Capital Funding, LLC at $0.00171 per share, as calculated per the loan agreement.
On July 24, 2017, the Company issued 735,903 common shares in the conversion of $810
principal and $404 in interest due to LG Capital Funding, LLC at $0.00165 per share, as calculated per the loan agreement.
On August 3, 2017, the Company issued 775,636 common shares in the conversion of $850
principal and $430 in interest due to LG Capital Funding, LLC at $0.00165 per share, as calculated per the loan agreement.
On August 18, 2017, the Company issued 812,860 common shares in the conversion of $885
principal and $456 in interest due to LG Capital Funding, LLC at $0.00165 per share, as calculated per the loan agreement.
18
On August 25, 2017, the Company issued 852,841 common shares in the conversion of $1,080
principal and $562 in interest due to LG Capital Funding, LLC at $0.00193 per share, as calculated per the loan agreement.
On August 31, 2017, the Company issued 897,810 common shares in the conversion of $810
principal and $424 in interest due to LG Capital Funding, LLC at $0.00138 per share, as calculated per the loan agreement.
On September 13, 2017, the Company issued 941,854 common shares in the conversion of $845
principal and $450 in interest due to LG Capital Funding, LLC at $0.00138 per share, as calculated per the loan agreement.
On September 20, 2017, the Company issued 989,403 common shares in the conversion of $885
principal and $475 in interest due to LG Capital Funding, LLC at $0.00138 per share, as calculated per the loan agreement.
On October 3, 2017, the Company issued 1,038,870 common shares in the conversion of $1,035 principal and $565 in interest due to
LG Capital Funding, LLC at $0.00154 per share, as calculated per the loan agreement.
On October 16, 2017, the Company issued 1,090,032 common shares in the conversion of $1,080
principal and $599 in interest due to LG Capital Funding, LLC at $0.00154 per share, as calculated per the loan agreement.
On October 19, 2017, the Company issued 1,141,941 common
shares in the conversion of $1,130 principal and $629 in interest due to LG Capital Funding, LLC at $0.00154 per share, as calculated per the loan agreement.
On November 6, 2017, the Company issued 1,201,538 common shares in the conversion of $1,180
principal and $670 in interest due to LG Capital Funding. LLC at $0.00154 per share, as calculated per the loan agreement.
On November 28, 2017, the Company issued 1,262,260 common shares in the conversion of
$2,325 principal and $1,354 in interest due to LG Capital Funding. LLC at $0.00292 per share, as calculated per the loan agreement.
On December 6, 2017, the Company issued 1,326,373 common shares in the conversion of $2,435
principal and $1,431 in interest due to LG Capital Funding. LLC at $0.00292 per share, as calculated per the loan agreement.
On December 22, 2017, the Company issued 2,009,595 common shares in the conversion of the
remaining $3,665 in principal and $2,193 in interest due to LG Capital Funding. LLC at $0.00292 per share, as calculated per the loan agreement.
The balance of the convertible debenture at December1 31, 2017 and December 31, 2016 was $0
and $24,500, respectively. The amount of accrued interest due at December 31, 2017 is $0, with $4,321 at December 31, 2016.
NOTE 5 - DERIVATIVE LIABILITY
The Company analyzed the conversion option embedded in the convertible debenture for derivative accounting
consideration under ASC 815 and determined that the embedded instrument should be classified as a liability and recorded at fair value due to the variable conversion prices. The fair value of the conversion options was determined to be $52,267 as
of the issuance date using a Black-Scholes option-pricing model. Upon the date of issuance of the convertible debenture, $31,500 was recorded as debt discount and $20,767 was recorded as day one loss on derivative liability.
Between March and December 2017, the holder of the convertible debenture elected to convert all $24,500
in principal of the convertible debenture into 18,263,209 shares of the Company’s common stock. As a result of debt conversions, $96,692 of derivative liability was extinguished through a charge to paid-in capital.
As the convertible debt with the conversion option requiring derivative accounting was fully converted
during the year ended December 31, 2017, the Company recorded the retirement of the derivative liability of $9,526 to additional paid-in capital.
During the years ended December 31, 2017 and 2016, $82,872 and $3,122 was recorded as a loss on
mark-to-market of the conversion options, respectively.
19
The following table
summarizes the derivative liability included in the balance sheet at December 31, 2017 and December 31, 2016:
Balance, December 31, 2015
|
$
|
20,225
|
||
Loss on change in fair value
|
3,122
|
|||
Balance, December 31, 2016
|
23,347
|
|||
Reclassification of derivative liability to paid-in capital
|
(96,691
|
)
|
||
Loss on change in fair value
|
82,871
|
|||
Extinguishment of liability to equity due to release from ASC 815
|
(9,526
|
)
|
||
Balance, December
31, 2017
|
$
|
-
|
The Company estimated the fair value of the derivative liabilities using the Black-Scholes option pricing model and the following key assumptions during the year ended December 31, 2017:
2017
|
2016
|
|||||||
Expected dividends
|
-
|
%
|
-
|
%
|
||||
Expected term (years)
|
0.12
|
0.12
|
||||||
Volatility
|
78% - 235
|
%
|
52% - 292
|
%
|
||||
Risk-free rate
|
0.74% - 1.33
|
%
|
0.25% - 0.74
|
%
|
NOTE 6 - LOAN TRANSACTION
The Company purchased a recorded music compilation from EuGene Gant for a purchase price of $5,000
pursuant to a Bill of Sale and Assignment dated June 15, 2012, an Exclusive Songwriter Agreement dated June 15, 2012, and a Promissory Note that the Company concurrently executed and delivered to him on the same date. The Company made a payment
to Mr. Gant in the amount of $1,000 on June 15, 2012 and $2,000 on October 1, 2012, and $1,000 on June 15, 2013, and the remaining $1,000 principal amount under Promissory Note bears interest at five percent (5%) per annum, and there is one
remaining principal installment payment in the amount of $1,162 due. Accrued and unpaid interest on the Promissory Note is also due in the amount of $69 for the year ended December 31, 2017, and $188 for the year ended December 31, 2016. As of
December 31, 2017 and December 31, 2016, total outstanding short-term debt is $1,419 and $1,350, respectively. The note matured on June 15, 2013 and the loan is currently in default.
The songwriter agreement expired on June 15, 2014 and the Company did not renew.
On October 22, 2015, Artfield Investment paid $2,100 in expenses on behalf of the Company. This loan is
unsecured, due on demand, and carries no interest. At December 31, 2017 and December 31, 2016, the total amount owed was $2,100 and $2,100, respectively.
NOTE 7 – RELATED PARTY
TRANSACTIONS
The Company has entered into transactions with the related party, IQ Acquisition (NY), Ltd, owned by Mr.
Richards, the CEO of the Company. IQ Acquisition (NY), Ltd, the major shareholder of the Company, has paid expenses on behalf of the Company in the amount of $135,015 during the year ended December 31, 2017 and $23,945 during the year ended
December 31, 2016. The Company reimbursed IQ acquisition (NY) in the amount of $142,779 and $0 during the years ended December 31, 2017 and 2016. The balance due to related party as of December 31, 2017 and December 31, 2016 was $15,000, and
$45,264, respectively. The advances are unsecured, payable on demand, and carry no interest.
NOTE 8 – MATERIAL CONTRACTS
On June 15, 2012, the Company entered into a songwriter agreement with Eugene Gant, a songwriter, which
provides for Mr. Gant’s employment as a staff writer on an exclusive basis to write musical compositions as works for hire for a period of two years from the date of the agreement. This agreement expired on June 15, 2014. The exclusive songwriter
agreement with Eugene B. Settler dated June 16, 2012, provides for Mr. Settler’s employment as a staff writer on an exclusive basis to write musical compositions as works for hire for a period of five years from the date of the agreement. This
agreement expires on June 16, 2017. During Mr. Gant’s and Mr. Settler’s tenure as songwriters for the Company, the copyrights on their entire work product will belong to the Company, in exchange for our assistance in exploiting and marketing
these compositions and the payment of a writer’s fee to them ranging from 10% to 50% of the net amounts that we collect on these musical compositions. The Company is entitled to the royalties for a period of 50 years from the date of the creation
of any work for hire pursuant to such agreements. After the expiration of such 50-year period, the copyright on a musical composition reverts to the songwriter or his heirs or assigns.
20
On June 4, 2015, Artfield Investment RD, Inc. was contracted to provide restructuring
consulting services to the Company for $45,000. Consultation fee shall be payable $22,500 in cash at the time of signing (6/4/2015), and the remaining fee of $22,500 to be paid through unrestricted shares. The entire $45,000 was due upon signing
the agreement and was recorded as a liability. The shares have not been issued as of the date of this filing.
NOTE 9 - EQUITY TRANSACTIONS
NOTE 9 - EQUITY TRANSACTIONS
The Company has authorized 10,000,000 shares of Preferred Stock and 140,000,000 shares of
Common Stock at par value of $0.001. At December 31, 2017 and December 31, 2016, the Company had 29,890,066 and 11,626,857 shares of common stock, and 2,090,000 and zero preferred shares, issued and outstanding, respectively.
On March 10, 2016, the Company filed an Amendment to the Articles of Incorporation breaking
out the Preferred Stock into Series A, B, C, D, E, F, G, H, I, J, K, and L, with the series designation of each issuance of preferred stock set forth by the Board of Directors at the time of issuance.
On March 21, 2017, the Company issued 572,476 common shares in the conversion of $2,000
principal and $834 in interest due to LG Capital Funding, LLC at $0.00495 per share, as calculated per the loan agreement.
On June 8, 2017, the Company issued 603,038 common shares in the conversion of $700
principal and $328 in interest due to LG Capital Funding, LLC at $0.00171 per share, as calculated per the loan agreement.
On June 13, 2017, the Company issued 638,926 common shares in the conversion of $740
principal and $350 in interest due to LG Capital Funding, LLC at $0.00171 per share, as calculated per the loan agreement.
On June 27, 2017, the Company issued 670,334 common shares in the conversion of $1,245
principal and $598 in interest due to LG Capital Funding, LLC at $0.00275 per share, as calculated per the loan agreement.
On July 18, 2017, the Company issued 701,519 common shares in the conversion of $800
principal and $396 in interest due to LG Capital Funding, LLC at $0.00171 per share, as calculated per the loan agreement.
On July 24, 2017, the Company issued 735,903 common shares in the conversion of $810
principal and $404 in interest due to LG Capital Funding, LLC at $0.00165 per share, as calculated per the loan agreement.
On August 3, 2017, the Company issued 775,636 common shares in the conversion of $850
principal and $430 in interest due to LG Capital Funding, LLC at $0.00165 per share, as calculated per the loan agreement.
On August 18, 2017, the Company issued 812,860 common shares in the conversion of $885
principal and $456 in interest due to LG Capital Funding, LLC at $0.00165 per share, as calculated per the loan agreement.
On August 25, 2017, the Company issued 852,841 common shares in the conversion of $1,080
principal and $562 in interest due to LG Capital Funding, LLC at $0.00193 per share, as calculated per the loan agreement.
On August 31, 2017, the Company issued 897,810 common shares in the conversion of $810
principal and $424 in interest due to LG Capital Funding, LLC at $0.00138 per share, as calculated per the loan agreement.
21
On September 13, 2017, the Company issued 941,854 common shares in the conversion of $845
principal and $450 in interest due to LG Capital Funding, LLC at $0.00138 per share, as calculated per the loan agreement.
On September 20, 2017, the Company issued 989,403 common shares in the conversion of $885
principal and $475 in interest due to LG Capital Funding, LLC at $0.00138 per share, as calculated per the loan agreement.
On October 3, 2017, the Company issued 1,038,870 common shares in the conversion of $1,035 principal and $565 in interest due to
LG Capital Funding, LLC at $0.00154 per share, as calculated per the loan agreement.
On October 16, 2017, the Company issued 1,090,032 common shares in the conversion of $1,080
principal and $599 in interest due to LG Capital Funding, LLC at $0.00154 per share, as calculated per the loan agreement.
On October 19, 2017, the Company issued 1,141,941 common shares in the conversion of $1,130
principal and $629 in interest due to LG Capital Funding, LLC at $0.00154 per share, as calculated per the loan agreement.
On November 6, 2017, the Company issued 1,201,538 common shares in the conversion of $1,180
principal and $670 in interest due to LG Capital Funding. LLC at $0.00154 per share, as calculated per the loan agreement.
On November 28, 2017, the Company issued 1,262,260 common shares in the conversion of
$2,325 principal and $1,354 in interest due to LG Capital Funding. LLC at $0.00292 per share, as calculated per the loan agreement.
On December 6, 2017, the Company issued 1,326,373 common shares in the conversion of $2,435
principal and $1,431 in interest due to LG Capital Funding. LLC at $0.00292 per share, as calculated per the loan agreement.
On December 14, 2017, in accordance with the Company's share subscription agreements with
the Series B subscribers, the Company issued 2,090,000 shares of Series B preferred stock to twenty-two (22) individual subscribers for a total cash procced of $569,773. Of the total 2,090,000 shares, 1,210,000 shares were issued at $0.30 per
share, 380,000 shares were issued at $0.40 per share, and the remaining 500,000 shares were issued for the services provided by an individual subscriber as compensation.
On December 22, 2017, the Company issued 2,009,595 common shares in the conversion of the remaining
$3,665 in principal and $2,193 in interest due to LG Capital Funding. LLC at $0.00291 per share, as calculated per the loan agreement.
NOTE 10 - CONVERTIBLE PREFERRED STOCK
In December 2017, the Company issued 1,210,000 shares of its Series B convertible preferred stock at a
price per share of $0.30 for gross proceeds of $363,000 and issued 380,000 shares of its Series B convertible preferred stock at a price per share of $0.40 for gross proceeds of $145,200. The net proceeds, after deducting the issuing cost, from
issuing the Series B convertible preferred stock in December 2017 was $201,809. In December 2017, the Company also issued 500,000 shares of its Series B convertible preferred stock to a third party as compensation, totally $160,000, for his
consulting services. The Series B shareholders are entitled, at their option, at any time after the issuance of the Series B convertible preferred stock, to convert all or any lesser portion of their shares into the Company’s common stock at a
conversion ratio 0.2 and at price of $1.59 per share.
Optional Conversion Rights
Each share of Series B convertible preferred stock is convertible at the option
of the holder into 0.2 share of common stock and at price of $1.59 per share. The conversion price per share for the convertible preferred stock shall be adjusted for certain recapitalizations, splits, combinations, common stock dividends or as set
forth in the Company’s amended and restated certificate of incorporation. At December 31, 2017, none of the Series B convertible preferred stock has been converted to common stock.
22
Voting Rights
Each share of convertible preferred stock has 0.2 votes equal to the number of shares of common stock into
which it is convertible.
Redemption Rights
There are no redemption rights afforded to the holders of convertible preferred stock. Upon certain change
in control events that are outside of the Company’s control, including liquidation, sale or transfer of control of the Company, the convertible preferred stock is contingently redeemable.
The holders of the Series B convertible preferred stock are not entitled to receive dividends and have
same liquidation rights that are possessed by the holders of the Company’s common stock.
The Company evaluated whether
or not the Series B convertible preferred stock above contained embedded conversion options, which meet the definition of derivatives under ASC Topic 815. The Company concluded that since the above convertible preferred shares had a fixed conversion
rate, the convertible preferred shares were not derivative instruments.
The convertible preferred shares were analyzed to determine if the convertible preferred shares have an
embedded beneficial conversion feature (BCF). Based on this analysis, the Company concluded that the effective conversion price was greater than the fair value of the Company’s common stock on the issuance dates and therefore no BCF was recorded.
The Company recorded its convertible preferred stock at fair value on the dates of issuance, net of
issuance costs. The total fair value of the convertible preferred stock on the date of issuance, net of issuance costs, was $361,809. As of December 31, 2017, total 2,090,000 shares of Series B convertible preferred
stock authorized, issued and outstanding.
NOTE 11 – FOREIGN
CURRENCY LOSS
The foreign currency loss of $26,085 arises from the transaction of issuing B Series Preferred Stock.
The proceeds were collected in RMB and the payout of the proceed were either in RMB or USD. In both circumstances, the collection and payout were recorded in USD and the conversion of RMB to USD were in accordance with the foreign exchange rates
on the proceed collection date and payout date. Due to the fluctuation of the foreign exchange rates, the foreign exchange rates on the proceed collection date and the payment date were different. The difference caused that the same amount of
RMB were converted to less USD on the payment date than on the collection date due to depreciation of the RMB.
NOTE 12 – INCOME TAXES
The Company provides for income taxes under ASC 740, “Income Taxes”. ASC 740 requires the use of an
asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these
differences are expected to reverse.
ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The provision for income taxes differs from the amounts which would be provided by applying the
statutory federal income tax rate of 34% to the net loss before provision for income taxes for the following reasons:
23
For the year
ended
|
For the year
ended
|
|||||||
December 31,
2017
|
December 31,
2016
|
|||||||
Income tax expense (asset) at statutory rate
|
$
|
(194,744
|
)
|
$
|
(103,080
|
)
|
||
Valuation allowance
|
194,744
|
103,080
|
||||||
|
||||||||
Income tax expense per books
|
$
|
-
|
$
|
-
|
The net operating loss carry forwards for the year ended December 31, 2017 was ($572,775), and for the
year ended December 31, 2016 was ($303,175), and for federal income tax reporting purposes is subject to annual limitations. The Company’s tax returns for the 3 years prior are subject to IRS inspection. The net federal operating loss carry
forward will expire in 2037. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.
NOTE 13 – SUBSEQUENT
EVENTS
On February 8, 2018, the Company entered into an Exclusivity Agreement and Non-Binding Letter of Intent
("LOI") to purchase 100% of a Chinese textile and home furnishings company, Jiangsu Ziyang Holiday Bedroom Articles Co. Ltd., (the "Acquisition"), and the parties intended to complete the purchase no later than July 31, 2018. To date, no
definitive purchase agreement has been executed.
The Company intended to engage a registered investment dealer in the United States, Asia and Canada to
raise sufficient capital to accomplish the purchase of the Acquisition and furnish working capital for the Company's growth. However, the Company was not able to meet such capital raise target before the deadline under the LOI, and postponed the
acquisition. The Company is still actively seeking financing resources for the acquisition but there can be no assurance that the acquisition will occur.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this evaluation, our CEO and CFO concluded that our disclosure controls were not effective as of the end of the period
covered by this report.
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:
24
● |
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 December 31, 2017. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission 1992 (“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 internal control over financial reporting as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of December
31, 2017 (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:
● |
Limited or no segregation of duties and lack of multiple levels of supervision and review.
|
● |
No independent directors.
|
● |
Ineffective controls over financial reporting.
|
●
|
Lack of controls over authorization related party transactions. |
Management believes that the material weaknesses set forth in the four 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.
|
25
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 Annual 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 Annual Report.
None.
26
Our directors and executive officers and their respective ages as of April 15, 2019, are as follows:
Name
|
|
Age
|
|
Principal Positions With Us
|
|
|
|
|
|
Mark W. Richards
|
|
56
|
|
President, Treasurer and Director
|
|
|
|
|
|
Ralph Willmott
|
|
62
|
|
Secretary and Director
|
The following describes the business experience of each of our directors and executive officers, including
other directorships held in public reporting companies, if any:
Set forth below is the biographical information about the director and executive officers:
Mark W. Richards - President, Treasurer and Director
Mark W. Richards has served as President, Treasurer and Director of the Company since December, 2013. Mr. Richards is
a New Zealand Registered Chartered Accountant in Public Practice and has practiced in such capacity since July 31, 1991. His history of chartered accountancy begins at Cox Arcus & Co., July 1991 to July 2001, Symmetry Accounting Limited, July
2001 to March 2009, Cleaver Richards Limited, March 2009 to February 2011, and Causeway Accounting Limited, since March 2011.In January 2008, Mr. Richards began acting for JDC Group of Nantong. On March 1, 2011, Mr. Richards formed IQ Acquisition
(NY) Ltd., a consulting firm based practice in Auckland, New Zealand, to attend to the strategic management of clients and their businesses and assisting clients from overseas business ventures with the management of both the businesses and
taxation structures to meet the requirements within New Zealand, the United States of America, Australia, Hong Kong, China, Thailand, Brunei, and the United Kingdom. Mr. Richards is a director for over 40 privately held companies and provides
management and consulting services to assist with the growth and financial requirements of those companies. In January 2008, Mr. Richards began acting for JDC Group of Nantong an entity responsible for the exportation of commodities for sale in
China. Since November 2006, Mr. Richards has acted as a consultant for Chemsafe Group to assist in the development and strategic roll- out of SCR based products in New Zealand, Australia and Asia. Mr. Richards is also the director for Tribeca
Homes, a property development advisory business in New Zealand. During February 2010, he assisted in development of GSBI Thailand marketing of Own Brand Products in Supermarkets, a strategic brand marketing company in Thailand, to provide advice on
brands to large corporations in Thailand. Mr. Richards has also acted as a consultant assisting companies in oil recovery, transportation, vehicle sales, product design and marketing, and fashion industries. We believe that Mr. Richard’s
qualifications and his extensive business experience provide a unique perspective for our board.
27
Ralph Willmott - Secretary and Director
Mr. Willmott has served as a Director and as Secretary of the Company since December 2013. Mr. Willmott has a wide
range of knowledge having experience with some major corporations earlier in his career, including Raab Karcher, the German manufacturer of construction products, Europe’s leading holiday complexes, Center Parcs and the Italian engineering
manufacture Cefla. He is also an experienced businessman, over the past fifteen years, he has gained considerable knowledge of doing business in Asia and has been involved with numerous companies in China covering imports into China and exports
from China, including construction products, joinery products, textiles and clothing, foodstuffs, and industrial chemicals. Having spent considerable periods of time in China, it is considered that the experience and contacts that Mr. Willmott
brings with him are of great value to our company.
Term of Office
All of our directors hold office until the next annual meeting of the shareholders or until their
successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.
Family Relationships
There are no family relationships among any of the Company’s directors and officers.
Board Composition and Committees
The Company’s Board of Directors is currently composed of two members, Mark W. Richards and Ralph
Willmott.
We do not have a standing nominating, compensation or audit committee. Rather, our full board of
directors performs the functions of these committees. Also, we do not have an “audit committee financial expert” on our board of directors as that term is defined by Item 407(d)(5)(ii) of Regulation S-K. We do not believe it is necessary for our
board of directors to appoint such committees because the volume of matters that come before our board of directors for consideration permits the directors to give sufficient time and attention to such matters to be involved in all decision making.
Involvement in Certain Legal Proceedings
None of our directors, executive officers or control persons has been involved in any of the events
prescribed by Item 401(f) of Regulation S-K during the past ten years, including:
1.
|
any petition under the Federal bankruptcy laws or any state insolvency law filed by
or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he or she was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing;
|
|
2.
|
any conviction in a criminal proceeding or being named a subject of a pending
criminal proceeding (excluding traffic violations and other minor offenses);
|
|
3.
|
being subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities:
|
|
i. |
acting as a futures commission merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in
connection with such activity;
|
|
ii. |
engaging in any type of business practice; or
|
|
iii. |
engaging in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
|
28
4.
|
being subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any type of business regulated by the Commodity Futures Trading Commission, securities,
investment, insurance or banking activities, or to be associated with persons engaged in any such activity;
|
|
5.
|
being found by a court of competent jurisdiction in a civil action or by the SEC to
have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
|
|
6.
|
being found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
|
|
7.
|
being subject to, or a party to, any Federal or State judicial or administrative
order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
|
|
i. |
any Federal or State securities or commodities law or regulation; or
|
|
ii. |
any law or regulation respecting financial institutions or insurance companies
including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
|
|
iii. |
any law or regulation prohibiting mail or wire fraud or fraud in connection with any
business entity; or
|
|
8.
|
being subject to, or a party to, any sanction or order, not subsequently reversed,
suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))),
or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Reason for Selection to Board of Directors
Our directors were appointed as a result of their business experience.
Conflicts of Interest
We believe that none of our directors, executive officers, or control persons will be subject
to conflicts of interest. No policy has been implemented or will be implemented to address conflicts of interest.
Compensation
We presently do not pay our officers/director any salary or consulting fee. We do not
anticipate paying compensation to officers/directors until our Company can generate sufficient cash flows on a regular basis.
We do not have any employment agreements with our officers/director. We do not maintain
key-man life insurance for any our executive officers/directors. We do not have any long-term compensation plans or stock option plans.
29
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten
percent (10%) of our shares of common stock, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent (10%) stockholders are required by regulations promulgated by the SEC to furnish us
with copies of all Section 16(a) forms that they file. With reference to transactions during the fiscal year ended December 31, 2014, to our knowledge, all Section 16(a) forms required to be filed with the SEC were filed.
Compensation Discussion and Analysis
Philosophy and objectives
Since our inception, all compensation decisions have been made by our Board of Directors. The primary
objective of our compensation policies and programs with respect to executive compensation is to serve our shareholders by attracting, retaining and motivating talented and qualified individuals to manage and lead our business. We will focus on
providing a competitive compensation package that provides significant short and long-term incentives for the achievement of measurable corporate and individual performance objectives.
Elements of executive compensation
Base
salary. We will seek to provide our senior management with a level of base salary in the form of cash compensation appropriate to their roles and responsibilities. Base salaries for our executives will be established based on the
executive’s qualifications, experience, scope of responsibilities, future potential and past performance and cash available to pay executive compensation. Base salaries will be reviewed annually and adjusted from time to time to realign salaries
with market levels after taking into account an individual's responsibilities, performance and experience. We will consider four factors in determining the base salaries of our named executive officers. These four factors are, in order of
significance, (1) creating an incentive to achieve corporate goals, (2) individual performance, (3) cash available to pay compensation and (4) the total compensation each executive officer previously received while employed with us, if any. We
have not paid any executive compensation in the form of base salary to our management during the period January 13, 2011, our inception, through December 31, 2017.
Incentive
cash bonuses. Our practice will be to seek to award incentive cash bonuses to our executive officers based upon their individual performance, as well as our overall business and strategic objectives. In determining the amount of cash
bonuses paid to our named executive officers, we will consider the same four factors as in determining their base salaries. We expect that our Board of Directors will adopt formal processes for incentive cash bonuses during the next 24 months and
will utilize incentive cash bonuses to reward executives for achieving corporate financial and operational goals and for achieving individual performance objectives. To date, we have not paid any incentive cash bonuses to our management.
Long-term
equity compensation. We believe that successful long-term performance is achieved through an ownership culture that encourages long-term performance by our executive officers through the use of stock and stock-based awards. We intend to
establish equity incentive plans to provide our employees, including our executive officers, with incentives to help align those employees’ interests with the interests of our shareholders.
30
We expect that our incentive plans will permit the grant of stock options, restricted shares and other
stock awards to our executive officers, employees, consultants and non-employee board members. When we hire executive officers in the future, we expect to grant them stock-based awards that will generally vest over a five-year period. We believe
that stock-based awards provide an incentive for these officers to continue their employment with us, provide our executive officers with an opportunity to obtain an ownership interest in our company and encourage them to focus on our long-term
profitable growth. We believe that the use of long-term equity compensation will promote our overall executive compensation objectives and expect that equity incentives will be an important source of compensation for our executives. In determining
amounts awarded to our executive officers under our incentive plans, we will consider the same four factors (and use the same method of measurement) as in determining base salary. The third factor (cash available) has an indirect effect when
determining long-term equity compensation. Specifically, to the extent that this factor causes us not to pay base salary or cash bonuses, it points toward providing long-term equity compensation. We have not issued any long-term equity
compensation to our management during the period January 13, 2011, our inception, through December 31, 2017.
Other
compensation. When we hire executive officers, our executive officers will be eligible to receive the same benefits, including non-cash group life and health benefits that are available to all employees. We may offer a 401(k) plan to our
employees, including our executive officers. This plan will permit employees to make contributions up to a statutory maximum and will permit us to make matching or profit-sharing contributions. To date, we have not offered to our employees any
benefit plans, including but not limited a 401(k) plan or made, or committed to make, any matching or profit-sharing contributions under a 401(k) plan.
Policies related to compensation
Guidelines
for equity awards. We have not formalized a policy as to the amount or timing of equity grants to our executive officers. We expect, however, that our board of directors will approve and adopt guidelines for equity awards. Among other
things, we expect that the guidelines will specify procedures for equity awards to be made under various circumstances, address the timing of equity awards in relation to the availability of information about us and provide procedures for grant
information to be communicated to and tracked by our finance department. As of the date of this report, we have not established a finance department. We anticipate that the guidelines will require that any stock options or stock appreciation
rights have an exercise or strike price not less than the fair market value of our common stock on the date of the grant.
Stock
ownership guidelines. As of the date of this report, we have not established stock ownership guidelines for our executive officers or the Board of Directors.
Compliance with Sections 162(m) and 409A of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1
million paid to certain executive officers, unless such compensation qualifies as performance-based compensation. Among other things, in order to be deemed performance-based compensation for Section 162(m) purposes, the compensation must be based
on the achievement of pre-established, objective performance criteria and must be pursuant to a plan that has been approved by our shareholders. At least for the next several years, we expect the cash compensation paid to our executive officers to
be below the threshold for non-deductibility provided in Section 162(m), and our equity incentive plans will afford our board of directors with the flexibility to make a variety of types of equity awards to our executive officers, the deductibility
of which will not be limited under Section 162(m). However, our board of directors will fashion our future equity compensation awards. However, we do not now know whether any such awards will satisfy the requirements for deductibility under
Section 162(m).
We also currently intend for our executive compensation program to satisfy the requirements of Internal
Revenue Code Section 409A, which addresses the tax treatment of certain nonqualified deferred compensation benefits.
31
Executive Compensation
The following table sets forth information concerning all cash and non-cash compensation awarded to,
earned by, or paid to the Company’s officers for the years ended December 31, 2017 and 2016 for services to the Company.
Name
|
Position
|
Year
Ended
&
Period
Ended
|
Salary
Paid
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||
Mark W. Richards
|
CEO
|
2017 |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
2016 | |||||||||||||||||||||||||||||
Ralph Willmott
|
Sec.
|
2017 |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
2016 |
-
|
- |
-
|
-
|
-
|
-
|
-
|
Compensation of Directors
The following table sets forth the information concerning cash and non-cash compensation awarded to, earned
by, or paid to the Company’s directors during the period from January 13, 2011 (inception) to December 3, 2017 for services to the Company.
Name
|
Year
Ended
&
Period
Ended
|
Fees
Earned
or Paid
in Cash
($)
|
Stock
Awards
($)(2)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||
|
|||||||||||||||||||||||||||||
Mark W. Richards
|
2017 |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
2016 | ||||||||||||||||||||||||||||
Ralph Willmott
|
2017 |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
2016 |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Employment Agreements and Benefits
We currently have two employees. Mr. Richards and Mr. Willmott. There are no executive employment
agreements with between the employees and the Company.
Potential Payments Upon Termination or Change in Control
As of the date of this report, there were no potential payments or benefits payable to our executive
officers, upon their termination or in connection with a change in control.
32
Pension Benefits
No named executive officers received or held pension benefits during the period from January 13, 2011
(inception) to December 31, 2017.
Nonqualified Deferred Compensation
No nonqualified deferred compensation was offered or issued to any named executive officer during the
period from January 13, 2011 (inception) to December 31, 2017.
Grants of Plan-Based Awards
During the period from January 13, 2011 (inception) to December 31, 2017, we have not granted any
plan-based awards to our executive officers.
Outstanding Equity Awards
No unexercised options or warrants were held by any of our named executive officers as of December 31,
2017 and December 31, 2016. No equity awards were made during the year ended December 31, 2017 and the year ended December 31, 2016.
Option Exercises and Stock Vested
During the period from January 13, 2011 (inception) to December 31, 2017, our executive officers have
neither been granted any options, nor did any unvested stock or options granted to executive officers vest. As of the date of this report, our executive officers do not have any stock options or unvested shares of stock of the Company.
Compensation Committee Interlocks and Insider Participation
During the period from January 13, 2011 (inception) to December 31, 2017, we did not have a standing
compensation committee. Our Board of Directors was responsible for the functions that would otherwise be handled by the compensation committee. All directors participated in deliberations concerning executive officer compensation, including
directors who were also executive officers.
Employment Agreements
We have not entered into any employment agreements with our executive officers. Our decision to enter into
an employment agreement, if any, will be made by our compensation committee.
Equity Incentive Plan
We expect to adopt an equity incentive plan. The purposes of the plan are to attract and retain qualified
persons upon whom our sustained progress, growth and profitability depend, to motivate these persons to achieve long-term company goals and to more closely align these persons' interests with those of our other shareholders by providing them with a
proprietary interest in our growth and performance. Our executive officers, employees, consultants and non-employee directors will be eligible to participate in the plan. We have not determined the amount of shares of our common stock to be
reserved for issuance under the proposed equity incentive plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The following table sets forth certain information regarding beneficial ownership of our common stock as of
April 11, 2019 for:
●
|
each person or group known to us to beneficially own 5% or more of our common stock;
|
●
|
each of our directors and director nominees;
|
●
|
each of our named executive officers; and |
● |
all of our executive officers and directors as a group.
|
33
Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment
power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated below, each entity or person listed below maintains an address of Level 1, 725 Rosebank Road,
Avondale, Auckland, 1348, New Zealand.
The number of shares beneficially owned by each shareholder is determined under rules promulgated by the SEC. The
information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting or investment power and any shares
as to which the individual or entity has the right to acquire beneficial ownership through the exercise of any stock option, warrant or other right within 60 days of April 11, 2019.
Beneficial Owner
|
Number of
Shares
Beneficially
Owned
|
Percentage
of Shares
Outstanding
|
||||||
|
||||||||
Mark W. Richards
|
8,160,000 |
27.30
|
% | |||||
|
||||||||
Ralph Willmott
|
0 |
0 |
||||||
|
||||||||
IQ Acquisition (NY) Ltd. (1)
|
8,160,000
|
27.30
|
%
|
|||||
|
||||||||
All directors and executive officers as a group (3 persons)
|
8,160,000
|
27.30
|
% |
* Mr. Richards owns IQ Acquisition (NY), Ltd., which is the record owner of 8,160,000 shares of common stock.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions With Related Persons, Promoters And Certain Control Persons
The Company has entered into transactions with the related party, IQ Acquisition (NY), Ltd, owned by Mr.
Richards, the CEO of the Company. IQ Acquisition (NY), Ltd, the major shareholder of the Company, paid expenses on behalf of the Company in the amount of $135,015 during the year ended December 31, 2017, and $23,945 during the year ended December
31, 2016. The balance due to related party as of December 31, 2017 and December 31, 2016 was $37,500 and $45,264, respectively. The advances are payable on demand and carry no interest.
The Company does not own or rent property. The office space is provided by an officer at no charge.
Director Independence
We do not have a standing nominating, compensation or audit committee. Rather, the board of directors
performs the functions of these committees. We do not believe it is necessary for the board of directors to appoint such committees, because the volume of matters that come before the board of directors for consideration is not so substantial that
our directors are usually allowed sufficient time and attention to such matters.
Annual Report on Form 10-K
Copies of our Annual Report on Form 10-K, without exhibits, can be obtained without charge from us at
Astika Holdings, Inc., Level 1, 725 Rosebank Road, Avondale, Auckland, 1348, New Zealand, or by telephone at (64) 9 929 0502.
The following table sets forth fees billed to us for principal accountant fees and services for year ended
December 31, 2017 and the year ended December 31, 2016.
34
|
Year Ended
December 31,
2017
|
Year Ended
December 31,
2016
|
||||||
|
||||||||
Audit Fees
|
$
|
20,000
|
$
|
14,000
|
||||
Audit-Related Fees
|
-
|
-
|
||||||
Tax Fees
|
-
|
-
|
||||||
All Other Fees
|
-
|
-
|
||||||
|
||||||||
Total Audit and Audit-Related Fees
|
$
|
20,000
|
$
|
14,000
|
(a) Exhibits
The following exhibits are filed with this Report on Form 10-K:
Exhibit No.
|
|
Description
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
31.1
|
|
|
|
|
|
32.1
|
|
|
101 INS
|
XBRL Instance Document
|
|
101 SCH
|
XBRL Schema Document
|
|
101 CAL
|
XBRL Calculation Linkbase Document
|
|
101 DEF
|
XBRL Definition Linkbase Document
|
|
101 LAB
|
XBRL Labels Linkbase Document
|
|
101 PRE
|
XBRL Presentation Linkbase Document
|
* Included as an Exhibit to our Registration Statement on Form S-1 filed on June 14, 2012
35
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, on the 15th day of April, 2019.
ASTIKA HOLDINGS, INC.
By: /s/ Mark W. Richards
Mark W. Richards
CEO, President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Mark W. Richards
Mark W. Richards
|
|
President, Chief Executive Officer,
(Principal Executive Officer), Treasurer
(Principal Financial and Accounting Officer), Chairman
|
|
April 15, 2019
|
|
|
|
|
|
/s/ Ralph Willmott
Ralph Willmott
|
|
Secretary and Director
|
|
April 15, 2019
|
36