Guskin Gold Corp. - Quarter Report: 2020 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: June 30, 2020
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 333-171636
INSPIRED BUILDERS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 27-1989147 | |
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
2nd Brewery Link Box mp 2797
Momprobi-Accro, Ghana
(Address of principal executive offices, Zip Code)
+233 244 887 610
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated 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 ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☐ | Smaller reporting company ☒ Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| none |
The number of shares of registrant’s common stock outstanding as of August 13, 2020 was 1,011,254.
FORM 10-Q
INSPIRED BUILDERS, INC.
June 30, 2020
TABLE OF CONTENTS
i
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K which was filed with the SEC on November 12, 2019 (the “10-K”), in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
ii
CONDENSED BALANCE SHEETS
| June 30, 2020 (Unaudited) | September 30, 2019 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 17,287 | $ | 101 | ||||
| TOTAL ASSETS | $ | 17,287 | $ | 101 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and Accrued Expenses | $ | 8,700 | $ | 20,364 | ||||
| Loan payable – Related Party | 14,496 | 5,762 | ||||||
| Convertible notes payable (net of unamortized discount) | 14,722 | - | ||||||
| Derivative liability | 1,712,106 | - | ||||||
| TOTAL LIABILITIES | 1,750,024 | 26,126 | ||||||
| Commitments and Contingencies (See Note 8) | - | - | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, par value $0.001 per share; 5,000,000 shares authorized; none shares issued and outstanding at June 30, 2020 and September 30, 2019, respectively | - | - | ||||||
| Common stock, par value $0.001 per share; 250,000,000 shares authorized; 1,011,254 shares issued and outstanding at June 30, 2020 and September 30, 2019, respectively | 1,011 | 1,011 | ||||||
| Additional paid in capital | 1,490,817 | 1,486,849 | ||||||
| Accumulated deficit | (3,224,565 | ) | (1,513,885 | ) | ||||
| Total stockholders' deficit | (1,732,737 | ) | (26,025 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 17,287 | $ | 101 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Operating expenses | ||||||||||||||||
| General and Administrative expenses | 33,608 | 12,003 | 81,724 | 47,084 | ||||||||||||
| Total operating expense | 33,608 | 12,003 | 81,724 | 47,084 | ||||||||||||
| Loss from operations | (33,608 | ) | (12,003 | ) | (81,724 | ) | (47,084 | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Cancellation of debt income from write off of debt | - | - | 3,194 | - | ||||||||||||
| Change in fair value of derivative | (1,615,956 | ) | - | (1,615,956 | ) | - | ||||||||||
| Interest expense | (16,194 | ) | (31 | ) | (16,194 | ) | (94 | ) | ||||||||
| Total other expenses | (1,632,150 | ) | (31 | ) | (1,628,956 | ) | (94 | ) | ||||||||
| Provision of income taxes | - | - | - | - | ||||||||||||
| Net loss | $ | (1,665,758 | ) | $ | (12,034 | ) | $ | (1,710,680 | ) | $ | (47,178 | ) | ||||
| Net loss per common share – basic and diluted | $ | (1.65 | ) | $ | (0.01 | ) | $ | (1.69 | ) | $ | (0.05 | ) | ||||
| Weighted average common shares outstanding – basic and diluted | 1,011,254 | 1,011,254 | 1,011,254 | 1,011,254 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTH PERIODS ENDED JUNE 30, 2020 AND JUNE 30, 2019
(Unaudited)
Statement of Stockholders’ Deficit for the Nine Months ended June 30, 2020
| Common Stock: Shares | Common Stock: Par Value | Additional Paid in Capital | Accumulated Deficit | Totals | ||||||||||||||||
| Balance – September 30, 2019 | 1,011,254 | $ | 1,011 | $ | 1,486,849 | $ | (1,513,885 | ) | $ | (26,025 | ) | |||||||||
| Net loss | - | - | - | (32,569 | ) | (32,569 | ) | |||||||||||||
| Balance December 31, 2019 (Unaudited) | 1,011,254 | $ | 1,011 | $ | 1,486,849 | $ | (1,546,454 | ) | $ | (58,594 | ) | |||||||||
| Net loss | - | - | - | (12,353 | ) | (12,353 | ) | |||||||||||||
| Balance March 31, 2020 (Unaudited) | 1,011,254 | $ | 1,011 | $ | 1,486,849 | $ | (1,558,807 | ) | $ | (70,947 | ) | |||||||||
| Capital Contribution | 3,968 | 3,968 | ||||||||||||||||||
| Net loss | - | - | - | (1,665,758 | ) | (1,665,758 | ) | |||||||||||||
| Balance June 30, 2020 (Unaudited) | 1,011,254 | $ | 1,011 | $ | 1,490,817 | $ | (3,224,565 | ) | $ | (1,732,737 | ) | |||||||||
Statement of Stockholders’ Deficit for the Nine Months ended June 30, 2019
| Common Stock: Shares | Common Stock: Par Value | Additional Paid in Capital | Accumulated Deficit | Totals | ||||||||||||||||
| Balance – September 30, 2018 | 1,011,254 | $ | 1,011 | $ | 1,451,949 | $ | (1,455,520 | ) | $ | (2,560 | ) | |||||||||
| Capital Contribution | - | - | 4,800 | - | 4,800 | |||||||||||||||
| Net loss | - | - | - | (21,780 | ) | (21,780 | ) | |||||||||||||
| Balance December 31, 2018 (Unaudited) | 1,011,254 | $ | 1,011 | $ | 1,456,749 | $ | (1,477,300 | ) | $ | (19,540 | ) | |||||||||
| Capital Contribution | - | - | 30,100 | - | 30,100 | |||||||||||||||
| Net loss | - | - | - | (13,364 | ) | (13,364 | ) | |||||||||||||
| Balance March 31, 2019 (Unaudited) | 1,011,254 | $ | 1,011 | $ | 1,486,849 | $ | (1,490,664 | ) | $ | (2,804 | ) | |||||||||
| Net loss | - | - | - | (12,034 | ) | (12,034 | ) | |||||||||||||
| Balance June 30, 2019 (Unaudited) | 1,011,254 | $ | 1,011 | $ | 1,486,849 | $ | (1,502,698 | ) | $ | (14,838 | ) | |||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (1,710,680 | ) | $ | (47,178 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
| Amortization of debt discount | 14,722 | - | ||||||
| Change in fair value of derivative | 1,615,956 | - | ||||||
| Cancellation of debt income from write off of debt | (3,194 | ) | . | |||||
| Changes in net operating assets and liabilities: | ||||||||
| Security deposits | - | 167 | ||||||
| Accounts payable and accrued expenses | (10,971 | ) | 8,345 | |||||
| NET CASH USED IN OPERATING ACTIVITIES | (94,167 | ) | (38,666 | ) | ||||
| CASHFLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible notes, net of original issue cost | 96,151 | - | ||||||
| Contribution of capital | 3,968 | 34,900 | ||||||
| Advances from related party | 140,799 | 3,262 | ||||||
| Repayment of advances from related party | (129,565 | ) | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 111,353 | 38,162 | ||||||
| NET INCREASE (DECREASE) IN CASH | 17,186 | (504 | ) | |||||
| CASH – BEGINNING OF PERIOD | 101 | 3,647 | ||||||
| CASH – END OF PERIOD | $ | 17,287 | $ | 3,143 | ||||
| SUPPLEMENTAL CASHFLOW INFORMATION: | ||||||||
| Cash paid for: | ||||||||
| Income tax | $ | - | $ | - | ||||
| Interest | $ | - | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Debt discount on convertibles note payable | $ | 96,151 | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIOD ENDED JUNE 30, 2020 and JUNE 30, 2019
(Unaudited)
Note 1 – Organization and Basis of Accounting
Basis of Presentation and Organization
Inspired Builders, Inc. (the “Company”) was incorporated in the State of Nevada in February 2010. Until August 15, 2017 the Company was directing its focus on acquiring, investing in, developing and managing real estate properties and related investments. On August 15, 2017, pursuant to a change in control transaction, we relocated to Miami, Florida and ceased all operations as a real estate company.
On January 16, 2020, Santa Alba, LLC sold the 956,440 shares of common stock to Custodian Ventures, LLC for an aggregate purchase price of $145,000. At this point there was a change of control of the Company and Kai Ming Zhao resigned as President, Secretary, Treasurer and Director and David Lazar was appointed as President, Secretary, Treasurer and Director.
On April 30, 2020, Custodian Ventures, LLC, a Wyoming limited liability company (“CVL”) and Inspired Builders, Inc., a Nevada corporation (the “Company”) entered into a Stock Purchase Agreement (the “Agreement”) with U Green Enterprise, a Ghana corporation (the “Purchaser”). The Agreement closed upon execution on April 30, 2020 (“Closing”). Pursuant to the Agreement, CVL agreed to sell and Purchaser agreed to purchase 956,440 restricted common stock shares of the Company (the “Shares”), representing approximately 94.6% of the Company’s outstanding shares of common stock. Pursuant to the Agreement, Purchaser agreed to pay CVL as follows: (i) $157,640 payable at the Closing in exchange for the Shares, and (ii) to repay the loan outstanding to CVL in amount of $67,360 immediately following the Closing. The Agreement resulted in a change of control of the Company and David Lazar resigned effective immediately as the Company’s Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and sole director and Edward Somuah was appointed as the Company’s Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and sole director.
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The unaudited condensed financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on form 10-K for the year ended September 30, 2019, filed with the SEC on November 12, 2019. The interim results for the period ended June 30, 2020 are not necessarily indicative of expected results for the full fiscal year. It is management’s opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.
Note 2 – Summary of significant accounting policies
Cash and Cash Equivalents
For purposes of reporting within the statements of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Earnings (Loss) per Share
In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. As of June 30, 2020 and 2019, the Company had 10,000,000 and 0 shares of common stock outstanding dilutive securities upon conversion of convertible notes held, respectively.
5
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Effective October 1, 2018, the Company adopted the guidance of ASC 606, Revenue from Contracts. The implementation of ASC 606 did not have a material impact on the Company’s financial statements. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The adoption of ASC 606 had no effect on previously reported balances.
We have no source of revenue as we are currently a shell company which is moving forward with the business of identifying and entering into a business combination with a privately held business or company. As such, we recognize no revenue.
Fair Value of Financial Investments
The fair value of cash and cash equivalents, accounts payable, accrued liabilities, and loans and notes payable approximates the carrying amount of these financial instruments due to their short-term maturity.
Recent Accounting Pronouncements
In July 2018, the FASB issued accounting standard update (“ASU”) No. 2017-02, “Leases (Topic 842)”, (“ASU 2017-02”) and ASU 2018-10, “Leases (Topic 842)”, (“ASU 2018-10”), respectively. These ASU’s require that an entity should recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. This new lease guidance is effective for fiscal years beginning after December 15, 2018. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. The Company currently leases no equipment or property, and therefore, the adoption on October 1, 2019 of the new standard has no effect on the Company’s financial statements.
Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements to determine their impact, if any, on our financial statements.
Note 3 – Going Concern
As reflected in the accompanying financial statements, the Company has a net loss of $1,710,680, an accumulated deficit of $3,224,565 and working capital deficit of $1,732,737 as of June 30, 2020. In addition, the Company has not had revenues since May 2011 and has relied on the support of its president and majority shareholder. A withdrawal of this support, for any reason, will have a material adverse effect on the Company’s financial position and its operations. If the Company does not begin to generate sufficient revenue or raise additional funds through a financing, the Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There are currently no plans or agreements in place to provide such funding. The Company will require additional funding to finance the growth of its future operations as well as to achieve its strategic objectives. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and generate revenue. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The COVID-19 pandemic could have an impact on our ability to obtain financing to fund the operations. The Company is unable to predict the ultimate impact at this time.
6
Note 4 – Related Party Transactions
During the period October 1, 2019 thru January 16, 2020, Kai Ming Zhao advanced a total of $6,079 to the Company to pay operating expenses. During the six months ended March 31, 2020, the loan balance of $9,341 was fully repaid. As of June 30, 2020, the Company had a loan payable remaining of $0 to Kai Ming Zhao.
During the period January 17, 2020 thru April 30, 2020, Custodian Ventures, LLC advanced a total of $67,360 to the Company to pay operating expenses.
On April 30, 2020, U Green Enterprise, a Ghana corporation controlled by our Chief Executive Officer agreed to repay the note outstanding to Custodian Ventures, LLC in amount of $67,360. In addition, Custodian agreed to waive their rights to any and all debt owed to them including interest. Also a total of $3,968 in Company related expenses were paid by Custodian Ventures, LLC. This was recorded in additional paid in capital as contributed capital. As of June 30, 2020, $0 was owed to Custodian Ventures, LLC. During the six months ended June 30, 2020, the Company repaid $52,864 to the related party. As of June 30, 2020, the Company had a loan payable of $14,496 owed to U Green Enterprises. The loan payable is non-interest bearing and due on demand.
Note 5 – Loan and notes payable – Related Parties
On January 13, 2012, the Company entered into a 12-month unsecured promissory note in the amount of $211,000. Interest accrues in arrears on the outstanding principal at the rate of ten percent (10.00%) per annum. Interest shall be payable on the last day of each quarter, commencing March 30, 2012, and continuing until the maturity date. Should the maker fail to pay the entire principal and accrued interest by the maturity date, the maker agrees that the interest rate shall increase to twelve percent (12.00%) per annum. On May 10, 2013, the Company and the related party agreed to extend the maturity of the loan for an additional year or until January 13, 2014. The loan maturity dates were further extended to January 13, 2016. On May 22, 2012, the Company borrowed an additional $32,714 from the related party, with the same terms, the loan maturity dates were extended to January 13, 2016. On September 17, 2012, the Company borrowed an additional $22,032 from the related party, with the same terms, the loan maturity dates were extended to January 13, 2016. On February 7, 2013, the Company borrowed an additional $28,773 from the related party, with the same terms, and on July 31, 2013, the Company borrowed an additional $30,000 from the related party, with the same terms. The loans maturity dates were further extended to February 7, 2016 and July 31, 2016, respectively. On December 20, 2013, the Company borrowed $2,500, on January 7, 2014, the Company borrowed $5,000, on February 6, 2014, the Company borrowed $5,520, the loans maturity dates were further extended to December 20, 2015 and January 7, 2016. On February 17, 2014, the Company borrowed $4,400 and on June 26, 2014, the Company borrowed $3,080, the loans maturity dates were further extended to February 6, 2016 and February 17, 2016, respectively. On November 15, 2016, the Company and the related party entered into a Release and Settlement Agreement whereby $342,519 in principal and $149,258 in accrued interest was forgiven. The transaction was accounted for as contributed capital. On December 31, 2019, the Company obtained a legal opinion that the note payable for $2,500 was no longer collectible under the statute of limitations in the State of California, the jurisdiction where the note was written. As a result, the principal amount of $2,500 and accrued interest of $694 was written off and accounted for as Cancellation of Debt Income.
The total outstanding principal at June 30, 2020 and December 31, 2019 amounted to $0 and $0, respectively. Accrued interest at June 30, 2020 and December 31, 2019, amounted to $0 and $0, respectively.
During the period October 1, 2019 thru January 16, 2020, Kai Ming Zhao advanced a total of $6,079 to the Company to pay operating expenses. During the six months ended March 31, 2020, the loan balance of $9,341 was fully repaid. As of March 31, 2020, the Company had a loan payable remaining of $0 to Kai Ming Zhao.
During the period January 17, 2020 thru April 30, 2020, Custodian Ventures, LLC advanced a total of $67,360 to the Company to pay operating expenses.
On April 30, 2020, U Green Enterprise, a Ghana corporation controlled by our Chief Executive Officer agreed to repay the note outstanding to Custodian Ventures, LLC in amount of $67,360. In addition, Custodian agreed to waive their rights to any and all debt owed to them including interest. Also a total of $3,968 in Company related expenses were paid by Custodian Ventures, LLC. This was recorded in additional paid in capital as contributed capital. As of June 30, 2020, $0 was owed to Custodian Ventures, LLC. During the six months ended June 30, 2020, the Company repaid $52,864 to the related party. As of June 30, 2020, the Company had a loan payable of $14,496 owed to U Green Enterprises. The loan payable is non-interest bearing and due on demand.
7
Note 6 – Convertible notes
On May 4, 2020, the Company began a convertible note offering of up to $3,000,000 under regulation S. The note offering calls for a minimum investment of $10,000. The note bears an interest rate equal to 10% per annum and matures after one year from the date of subscription. The note is convertible at the rate equivalent to the lessor of $0.01 per share or a 20% discount to market based upon the 10 day Volume Weighted Average Price (VWAP0 prior to Maturity. The Company intends to regularly issues notes payable which are convertible at a discount of the trading price of the Company’s common stock. Due to these provisions, the embedded conversion option qualified for derivative accounting under ASC 815-15, Derivatives and Hedging. For the period May 4, 2020 thru June 30, 2020, the company entered into six convertible note subscriptions totaling $100,000 with investors. The Company recorded debt discounts totaling $100,000, which included an original issuance cost of $3,849, as well as amortization of debt discount of $14,722. The company also recorded accrued interest on these notes totaling $1,472.
A summary of value changes to the notes for the three months ended June 30, 2020 is as follows:
| Carrying value of Convertible Notes as of September 30, 2019 | $ | - | ||
| New principal | 100,000 | |||
| Total principal | 100,000 | |||
| Less: conversion of principal | - | |||
| Less: discount related to fair value of the embedded conversion feature | (96,151 | ) | ||
| Less: discount related to original issue discount | (3,849 | ) | ||
| Add: amortization of discount | 14,722 | |||
| Carrying value of Convertible Notes as of June 30, 2020 | $ | 14,722 |
NOTE 7 – Derivative liability
The Company has determined that the variable conversion prices under its convertible notes caused the embedded conversion feature to be a financial derivative. The derivative instruments were valued at loan origination date, date of debt conversion and at June 30, 2020. The fair values of the derivative liabilities related to the conversion options of these notes was estimated on the transaction dates (loan original date and reporting date) using the Black Scholes option pricing model, under the following assumptions:
| June 30, | ||||
| 2020 | ||||
| Shares of common stock issuable upon exercise of debt | 10,000,000 | |||
| Estimated market value of common stock on measurement date | $ | 0.18 | ||
| Exercise price | $ | 0.01 | ||
| Risk free interest rate (1) | 0.16 | % | ||
| Expected dividend yield (2) | 0.00 | % | ||
| Expected volatility (3) | 191 | % | ||
| Expected exercise term in years (4) | 0.85 - 1.00 | |||
| (1) | The risk –free interest rate was determined by management using the one month Treasury bill yield as of the valuation dates. |
| (2) | The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. |
| (3) | The volatility was determined by referring to the average historical volatility of a peer group of public companies because we do not have sufficient trade history to determine our historical volatility. |
| (4) | The exercise term is the remaining contractual term of the convertible instrument at the valuation date. |
8
The change in fair values of the derivative liabilities related to the Convertible Notes for the three months ended June 30, 2020 is summarized as:
| Fair value at June 30, |
Quoted market prices for identical assets/liabilities |
Significant other observable inputs |
Significant unobservable inputs |
|||||||||||||
| 2020 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Derivative Liability | $ | 1,712,106 | $ | - | $ | - | $ | 1,712,106 | ||||||||
| Derivative Liability |
||||||||||||||||
| Derivative liability as of September 30, 2019 | $ | - | ||||||||||||||
| Fair value at the commitment date for convertible instruments | 1,716,818 | |||||||||||||||
| Change in fair value of derivative liability | (4,712 | ) | ||||||||||||||
| Reclassification to additional paid-in capital for financial instruments that ceased to be a derivative liability | - | |||||||||||||||
| Derivative liability as of June 30, 2020 | $ | 1,712,106 | ||||||||||||||
| Change in | ||||||||||||||||
| Fair Value of | ||||||||||||||||
| Derivative Liability* |
||||||||||||||||
| Change in fair value of derivative liability at the beginning of period | $ | - | ||||||||||||||
| Day one gains/(losses) on valuation | (1,620,668 | ) | ||||||||||||||
| Gains/(losses) from the change in fair value of derivative liability | 4,712 | |||||||||||||||
| Change in fair value of derivative liability at the end of the period | $ | (1,615,956 | ) | |||||||||||||
| ** | The fair value at the remeasurement date is equal to the carrying value on the balance sheet. |
Note 8 – Commitments and Contingencies
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
Note 9 – Concentration of Credit Risk
The Company relies heavily on the support of its president and majority shareholder. A withdrawal of this support, for any reason, will have a material adverse effect on the Company’s financial position and its operations.
Note 10 – Common Stock
As of June 30, 2020, 1,011,254 shares of common stock with par value of $0.001 remains outstanding.
Note 11 – Subsequent Events
On July 29, 2020, the Company received a seventh subscription of its Convertible note offering for an aggregate principal amount of $25,000.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Development
Inspired Builders, Inc. (the “Company”) was incorporated in the State of Nevada in February 2010. Until August 15, 2017 the Company was directing its focus on acquiring, investing in, developing and managing real estate properties and related investments. On August 15, 2017, pursuant to a change in control transaction, we relocated to Miami, Florida and ceased all operations as a real estate company. On February 15, 2018, Inspired Builders (the “Company”), the majority shareholders of the Company (the “Sellers”) and Santa Alba, LLC (the “Purchaser”) entered into a stock purchase agreement (the “Stock Purchase Agreement”), whereby the Purchaser purchased from the Sellers 956,440 shares of common stock, par value $0.001 per share, of the Company (the “Shares”), representing approximately 94.58% of the issued and outstanding shares of the Company, for an aggregate purchase price of $300,000 (the “Purchase Price”). On February 15, 2018, the closing of the transaction occurred (“Closing Date”). Also, in connection therewith, Scott Silverman, the Company’s sole officer and Director, resigned from his positions and named Kai Ming Zhao as sole director and to the positions of CEO, CFO, Chief Accounting Officer and Secretary.
On January 16, 2020, Santa Alba, LLC sold the 956,440 shares of common stock to Custodian Ventures, LLC for an aggregate purchase price of $145,000. At this point there was a change of control of the Company and Kai Ming Zhao resigned as President, Secretary, Treasurer and Director and David Lazar was appointed as President, Secretary, Treasurer and Director.
On April 30, 2020, Custodian Ventures, LLC, a Wyoming limited liability company (“CVL”) and Inspired Builders, Inc., a Nevada corporation (the “Company”) entered into a Stock Purchase Agreement (the “Agreement”) with U Green Enterprise, a Ghana corporation (the “Purchaser”). The Agreement closed upon execution on April 30, 2020 (“Closing”). Pursuant to the Agreement, CVL agreed to sell and Purchaser agreed to purchase 956,440 restricted common stock shares of the Company (the “Shares”), representing approximately 94.6% of the Company’s outstanding shares of common stock. Pursuant to the Agreement, Purchaser agreed to pay CVL as follows: (i) $157,640 payable at the Closing in exchange for the Shares, and (ii) to repay the loan outstanding to CVL in amount of $67,360 immediately following the Closing. Additionally, the Company has entered into a consulting agreement with CVL for a 60 day term for the provision of transitional services for the benefit of the Company. The Closing of the Agreement effectuated a change in control of the Company. As a result of the Closing, the Purchaser owns approximately 94.6% of the Company's issued and outstanding common stock.
On April 30, 2020, Mr. David Lazar resigned effective immediately as the Company’s Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and sole director. Mr. Lazar’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, practices, or otherwise. The Board approved and accepted Mr. Lazar’s resignation on April 30, 2020. On that same date, Mr. Edward Somuah was appointed to serve as the Company’s Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and member of the Board of Directors to serve until the next annual meeting and until his successor is duly appointed. Mr. Somuah accepted such appointment on April 30, 2020.
The Company's current business objective is to seek a business combination with an operating company. We intend to use the Company's limited personnel and financial resources in connection with such activities. The Company will utilize its capital stock, debt or a combination of capital stock and debt, in effecting a business combination. It may be expected that entering into a business combination will involve the issuance of restricted shares of capital stock. The issuance of additional shares of our capital stock:
| ● | may significantly reduce the equity interest of our stockholders; |
| ● | will likely cause a change in control if a substantial number of our shares of capital stock are issued, and most likely will also result in the resignation or removal of our present officer and director; and |
| ● | may adversely affect the prevailing market price for our common stock. |
Similarly, if we issued debt securities, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after a business combination were insufficient to pay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contained covenants that required the maintenance of certain financial ratios or reserves and any such covenants were breached without a waiver or renegotiations of such covenants; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security was payable on demand; and |
| ● | our inability to obtain additional financing, if necessary, if the debt security contained covenants restricting our ability to obtain additional financing while such security was outstanding. As of the date of this report, the Company has not entered into any business combination, debt or equity transaction. |
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The Company’s fiscal year end is September 30.
In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic, and it continues to spread throughout the United States and the rest of the world with different geographical locations impacted more than others. The outbreak of COVID-19 and public and private sector measures to reduce its transmission, such as the imposition of social distancing and orders to work-from-home, stay-at-home and shelter-in-place, have had a minimal impact on our day to day operations. However this could impact our efforts to enter into a business combination as other businesses have had to adjust, reduce or suspend their operating activities. The extent of the impact will vary depending on the duration and severity of the economic and operational impacts of COVID-19. The Company is unable to predict the ultimate impact at this time.
Results of Operations
For the three months ended June 30, 2020 compared to the three months ended June 30, 2019.
Operating Expenses
For the three months ended June 30, 2020, we incurred operating expenses of $33,608 as compared to $12,003 for the comparable period in 2019. Increase was attributable to increased consulting fees related to the change of control and legal fees.
Net Loss
For the three months ended June 30, 2020 we incurred a net loss of $1,665,758 as compared to $12,034 for the comparable period in 2019. The increase is attributable to loss on derivative of $1,615,956 associated with new convertible notes as well as interest expense $1,472 and amortization of debt discount of $14,722 associated with those notes.
For the nine months ended June 30, 2020 compared to the nine months ended June 30, 2019.
For the nine months ended June 30, 2020, we incurred general and administrative expenses of $81,724 as compared to $47,084 in 2019. Increase was attributable to increased consulting fees related to the change of control and legal fees.
Net Loss
For the nine months ended June 30, 2020 we incurred a net loss of $1,710,680 as compared to a net loss of $47,178 for the comparable period in 2019. The increase is attributable to loss on derivative of $1,615,956 associated with new convertible notes as well as interest expense $1,472 and amortization of debt discount of $14,722 associated with those notes offset by $3,194 of cancellation of debt.
Liquidity and Capital Resources
As of June 30, 2020, we have $17,287 in current assets and $1,750,024 in current liabilities. We had $17,287 in cash and our working capital deficit was $1,732,737.
Cash Flows:
| For the nine months ended | ||||||||
| June 30, | ||||||||
| 2020 | 2019 | |||||||
| Cash Flows used in Operating Activities | $ | (94,167 | ) | $ | (38,666 | ) | ||
| Cash Flows used in Investing Activities | - | - | ||||||
| Cash Flows Provided by Financing Activities | 111,353 | 38,162 | ||||||
| Net increase (decrease) in cash | $ | 17,287 | $ | (504 | ) | |||
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The Company has not had revenues since May 2011 and to date, has relied on the support of its president and majority shareholder. A withdrawal of this support, for any reason, will have a material adverse effect on the Company’s financial position and its operations. If the Company does not begin to generate revenue or raise additional funds through a financing, the Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There are currently no plans or agreements in place to provide such funding. The Company will require additional funding to finance the growth of its future operations as well as to achieve its strategic objectives. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and generate revenue. Our unaudited condensed financial statements have been prepared on the basis that we will continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Our independent registered public accounting firm has included its audit report to the audited financial statements for the years ended September 30, 2019 and 2018 stating substantial doubt about our ability to continue as a going concern.
The COVID-19 pandemic could have an impact on our ability to obtain financing to fund the operations. The Company is unable to predict the ultimate impact at this time.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.
Contractual Obligations and Commitments
We did not have any contractual obligations.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our condensed financial statements for the nine months ended June 30, 2020, and are included elsewhere in this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and the Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of June 30, 2020. Based upon that evaluation, the Company’s CEO concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2020 due to the Company’s limited internal resources and lack of ability to have segregation of duties and multiple levels of transaction review.
Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop procedures to address the current deficiencies to the extent possible given limitations in financial and manpower resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
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.
None.
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The following exhibits are included with this report.
| 3.1 | Articles of Incorporation and Certificate of Correction(1) |
| 3.2 | By-Laws(1) |
| 3.3 | Certificate of Amendment to Articles of Incorporation, dated December 18, 2017.(1) |
| 10.1 | Stock Purchase Agreement dated April 30, 2020 between U Green and Custodian Ventures(1) |
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)(2) |
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2) |
| 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 Label Linkbase Document |
| 101.PRE* | XBRL Presentation Linkbase Document |
(1) Previously Filed
(2) Filed Herewith
| * | Filed Herewith. Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| INSPIRED BUILDINGS, INC. | ||
| Date: August 14, 2020 | By: | /s/ Edward Somuah |
| Edward Somuah, Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial and accounting officer) |
||
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