FOOTHILLS EXPLORATION, INC. - Quarter Report: 2015 June (Form 10-Q)

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

The accompanying unaudited financial statements of Key Link Assets Corp. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (“Commission” or “SEC”). While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary in order to make the financial statements not misleading and for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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KEY LINK ASSETS CORP.

BALANCE SHEETS

(UNAUDITED)

The accompanying notes are an integral part of the financial statements.

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KEY LINK ASSETS CORP.

STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of the financial statements.

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KEY LINK ASSETS CORP.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of the financial statements.

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KEY LINK ASSETS CORP.

NOTES TO FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

NOTE 1 - ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN CONSIDERATION

Key Link Assets Corp. (the "Company") was incorporated in the State of Delaware on May 13, 2010 for the purpose of acquiring a portfolio of heavily discounted real estate properties in the Chicago metropolitan area. The Company has changed its focus and now plans to acquire small and medium sized grocery stores in non-urban locales that are not directly served by large national supermarket chains.

Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 915-205 “Development-Stage Entities” and among the additional disclosures required as a development stage company are that the financial statements were identified as those of a development stage company, and that the statement of operations, stockholders’ deficit and cash flows disclosed activity since the date of our Inception (May 13, 2010) as a development stage company.  Effective June 10, 2014, FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014. The Company has adopted these provisions and consequently these additional disclosures are not included in these financial statements.

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. As of June 30, 2015, the Company had an accumulated deficit of $178,610, negative working capital of $48,563 and has earned no revenues since inception. The Company intends to fund its operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements.

The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and the implementation of its business plan. 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.

NOTE 2 - BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2015, are not necessarily indicative of the results that may be expected for the year ended December 31, 2015.

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NOTE 3 - NOTE PAYABLE OTHER

On September 29, 2013, a creditor of the Company converted accounts payable in the amount of $34,541 into a note payable. The note payable, which is due on June 30, 2017, is non-interest bearing and has no collateral.

NOTE 4 - CAPITAL STOCK

Authorized Stock

The Company has authorized 100,000,000 common shares with a par value of $0.0001 per share and 25,000,000 preferred shares with a par value of $0.0001 per preferred share.  Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation is sought. The rights, preferences and restrictions of the preferred shares will be defined by the Company’s Board of Directors when and if the preferred shares are issued.

There have been no stock issuances for the period ended June 30, 2015.

NOTE 5 - RELATED PARTY TRANSACTIONS

As of December 31, 2014, Mr. Clark has loaned the Company $27,578. The notes payable, are due on June 30, 2017, are non-interest bearing and have no collateral.

During the first six months of 2015, Mr. Clark loaned the Company an additional $7,517 in exchange for four notes payable, all of which are due on June 30, 2017. The notes are non-interest bearing and have no collateral.

NOTE 6 - SUBSEQUENT EVENT

During the third quarter of 2015 through July 31, 2015, Mr. Clark loaned the Company $300. The loan is due on June 30, 2017, is non-interest bearing and has no collateral.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited financial statements, including the notes thereto, appearing elsewhere in this Report. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily occur.  This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Report, our actual results may differ materially from those anticipated in these forward-looking statements.   

Overview

The Company intends to acquire small and medium sized grocery stores that are the dominant presence in their non-urban markets. By acquiring stores that are situated in less competitive locales that are not directly served by large national supermarket chains, wholesale clubs and supercenters, the Company believes that it can achieve financial returns that meet or exceed industry norms because stores in less competitive locales will be under less pressure to heavily discount their prices. The acquisitions will be clustered regionally, which will allow the Company to centralize certain operational functions, including purchasing and marketing. The centralization of these functions should provide the consolidated stores with the critical mass and leverage to demand enhanced service and financial concessions from its distributors and marketing vendors.

We have not yet acquired any grocery stores under our business plan and have not begun operations.

Overall Outlook

Our main business emphasis will be on revenues from sales generated in our stores. Due to a number of factors affecting consumers, including among others the increasing Federal deficit, volatility in the stock market, the European debt crisis and high unemployment levels, all of which have resulted in reduced levels of consumer spending, the outlook for the supermarket industry remains highly unpredictable. Because of these uncertain conditions, we will need to focus on managing our operating margins. Our present objective is to manage our cost and expense structure to address the expected depressed business volumes and generate strong and stable cash flow. We will continually work to position our Company for greater success by strengthening our existing operations and growing through capital investment and other strategic initiatives.

Plan of Operation

We are a development stage company. We have not yet started operations or generated or realized any revenues from our business operations. The Company does not own any grocery stores and has no current plans, proposals or arrangements, written or otherwise, to acquire any grocery stores. The Company has not identified any potential acquisition targets.

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Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months unless we obtain additional capital to pay our bills. As of June 30, 2015, we have an accumulated deficit of $178,610, we have not generated any revenues and no revenues are anticipated until we begin operating retail grocery establishments. Accordingly, we must raise cash from sources other than our operations. Our only other sources for cash at this time are commercial financings and additional sales of stock. Our success or failure will be determined by what additional financing we obtain and the success of our planned retail grocery establishments.

We have no employees at this time. We intend to hire employees and engage independent contractors as justified by the demands of the business and depending on the availability of funding.

Results of Operations

Comparison of Three and Six Month Periods Ended June 30, 2015 and June 30, 2014

Revenue

We have not earned any revenues for the three and six months ended June 30, 2015 and 2014. We can provide no assurance that we will commence operations or that such operations, if commenced, will be successful.

Operating Expenses

Operating expenses increased by $3,224, or 71%, from $4,535 for the three month period ended June 30, 2014 to $7,759 for the three month period ended June 30, 2015.

Operating expenses decreased by $513, or 5.0%, from $10,440 for the six month period ended June 30, 2014 to $9,927 for the six month period ended June 30, 2015.

The increase in our operating expenses for the three month period ended June 30, 2015 is primarily attributable to the increase in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2014 related to the filing of the Company's registration statement.

The decrease in operating expenses for the six month period ended June 30, 2015 is primarily related to the decrease in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2014 related to the filing of the Company's registration statement.

Operating Loss

Our operating loss increased by $3,224, from $4,535 for the three month period ended June 30, 2014 to $7,759 for the three month period ended June 30, 2015.

Our operating loss decreased by $513, from $10,440 for the six month period ended June 30, 2014 to $9,927 for the six month period ended June 30, 2015.

The increase in our operating loss for the three month period ended June 30, 2015 is primarily attributable to the increase in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2014 related to the filing of the Company's registration statement.

The decrease in our operating loss for the six month period ended June 30, 2015 is primarily attributable to the decrease in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2014 related to the filing of the Company's registration statement.

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Net Loss

Net loss increased by $3,224, or 71%, from a net loss of $4,535 for the three month period ended June 30, 2014 to a net loss of $7,759 for the three month period ended June 30, 2015.

Net loss decreased by $513, or 5.0%, from a net loss of $10,440 for the six month period ended June 30, 2014 to a net loss of $9,927 for the six month period ended June 30, 2015.

The increase in our net loss for the three month period ended June 30, 2015 is primarily attributable to the increase in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2014 related to the filing of the Company's registration statement.

The decrease in net loss from the six month period ended June 30, 2015 is primarily attributable to the decrease in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2014 related to the filing of the Company's registration statement.

Liquidity and Capital Resources

Since inception, we have raised $59,000 through the sale of our common stock and have incurred expenses of $178,610. Our projected financial requirements for the next 12 months are $163,500.

Our initial financial requirements will be funded by a public or private offering of securities, commercial financing, loan from officers or directors or a combination of these means. We have not yet made plans to conduct a securities offering, obtain commercial financing or a private loan. The Company does not have any commitments or arrangements to obtain any such funds and there can be no assurance that required financing will be available to the Company on acceptable terms, if at all. The unavailability of additional financing could prevent or delay the implementation of the Company’s business plan and may require the Company to curtail or terminate its operations. If sufficient financing is unavailable, the Company will defer non-essential operating expenses until sufficient funds become available. We will not begin to implement our business plan until we have secured the funds necessary to commence operations. The Company is in its development stage and has not begun operations.  As such, the Company has no historical periods with which to compare anticipated capital requirements in the future.

Net Cash - Operating Activities

Net cash used in operating activities was $7,528 for the six month period ended June 30, 2015 and $6,050 for the six month period ended June 30, 2014.

Net Cash - Financing Activities

Net cash flow provided by financing activities was $7,517 for the six month period ended June 30, 2015 and $6,060 for the six month period ended June 30, 2014. The cash provided by financing activities is primarily attributable to loans made to the Company by a shareholder of the Company.

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Limited Operating History; Need for Additional Capital

After we acquire grocery stores, we intend to fund operations with revenue generated from operations. However, we have not yet commenced operations, and commencement of operations is subject to the availability of sufficient capital. Until we generate revenues, we expect to finance operating costs over the next twelve months with existing cash on hand, commercial financing, private loans and/or the proceeds from a public and/or private securities offering. The extent of our operations will be governed by the amount of capital we are able to raise.

Important Assumptions

Start-up companies involve a high degree of risk and many development stage companies never commence operations or achieve their business plans.  At this stage without having commenced operations, we are unable to determine whether we will be able to sufficiently convert our business plan into a successful business operation. The implementation of our business plan will be possible only upon obtaining sufficient funding.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Changes In and Disagreements with Accountants

None.

Critical Accounting Policies

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In accordance with GAAP, we are required to make estimates and assumptions that affect the reported amounts included in our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. On an ongoing basis, management reviews and refines those estimates.

Judgments are based on information including, but not limited to, historical experience, industry trends, conventional practices, expert opinions, terms of existing agreements and information from outside sources. Judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from these estimates.

ITEM 3.  QUANTITATIVE AND QUALITATIVE ANALYSIS ABOUT MARKET RISK

Not applicable.

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ITEM 4.  CONTROLS AND PROCEDURES

The Company's management, including the President and Chief Executive Officer ("CEO") and Chief Operating Officer (“COO”) conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures as of June 30, 2015. Based on that evaluation, the CEO and COO have concluded that the Company’s disclosure controls and procedures are not effective to provide reasonable assurance that: (i) information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company's management, including the CEO and COO as appropriate to allow timely decisions regarding required disclosure by the Company; or (ii) information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Further, management necessarily, due to the limited resources of the Company, has been required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  

The Company and its advisors are in the process of reviewing and completing a formal Disclosure Controls and Procedures policy and expects to have such a policy in place by the end of the fourth quarter 2015 and to continue to take additional steps necessary to ensure all controls and procedures are in place for full compliance with a goal to have all of our remediation measures in place by the end of the first quarter 2016. Management is in the process of implementing a remediation plan of the above-mentioned weaknesses in our internal control over financial reporting which includes but is not limited to the following steps:

·

Establish and implement a detailed timeline for review and completion of financial reports to be included in our Forms 10-Q and 10-K; and

·

Employ the use of appropriate  SEC and U.S. GAAP checklists in connection with our closing process and the preparation of our Forms 10-Q and 10-K.

The implementation of these remediation plans has been initiated and will continue through the second half of fiscal 2015. The material weaknesses will not be considered remediated until the applicable remedial procedures are tested and management has concluded that the procedures are operating effectively. Management recognizes that use of our financial resources will be required not only for implementation of these measures but also for testing their effectiveness and may seek the assistance of an outside service provider to assist in this process.

If we are not able to implement controls to avoid the occurrence of material weaknesses in our internal control over financial reporting in the future, then we might report results that are not consistent with our actual results and we may need to restate results that will have been previously reported.

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PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 1A.  RISK FACTORS

Not applicable

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

Exhibits required by Item 601 of Regulation S-K:

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* Pursuant to Rule 406T of Regulation S-T, the interactive files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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