Zhong Ya International Ltd - Quarter Report: 2016 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-Q
QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the three month period ended June 30, 2016
Commission file number: 333-152950
Western Lucrative Enterprises, Inc.
(Exact Name of Registrant as Specified in its Charter)
Iowa 26-3045445
______________________ _______________
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
64 North Pecos, Suite 900
Henderson, NV 89074
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (702) 472-5066
Securities registered pursuant to Section 12(b) of the Act: None
Common Stock, $0.001 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes No
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
Indicate by check 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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-Q or any amendment to this Form 10-Q.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer Accelerated Filer
Non-accelerated filer Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of June 30, 2015, there was no active trading market for the issuer's common stock, $.001 par value and therefore the value of shares held by affiliates cannot be ascertained.
The number of shares outstanding of the issuer's common stock, $.001 par value, as of March 31, 2016 was 8,505,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
1
Western Lucrative Enterprises, Inc.
Form 10-Q Quarterly Report
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements 4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
Item 3. Quantitative and Qualitative Disclosures about Market Risk 23
Item 4. Controls and Procedures 23
PART II – OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 1A. Risk Factors 24
Item 2. Selected Financial Data 24
Item 3 Defaults Upon Senior Securities . 24
Item 4. Removed and Reserved 24
Item 5. Other Information 24
Item 6. Exhibits 24
2
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PART 1
ITEM 1. FINANCIAL STATEMENTS
Financial Statements for the 6 month period ended June 30, 2016 have been prepared by the Management Group of Western Lucrative Enterprises, Inc.
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Financial Statements
June 30, 2016 and 2015
Page(s)
Balance Sheets as of June 30, 2016 and December 31, 2015 6
Statements of Operations for the 3 Months Ended June 30, 2016 and 2015, the 6 months
ended June 30, 2016 and 2015 and the Period from the Inception on July 14, 2008 to June 30, 2016 7
Statements of Cash Flows for the 6 Months Ended June 30, 2016 and 2015, and the Period from the
Inception on July 14, 2008 to June 30, 2016 8
Notes to the Financial Statements 9-18
3
WESTERN LUCRATIVE ENTERPRISES, INC. | |||||
(A Developmental Stage Enterprise) | |||||
Balance Sheets | |||||
|
| ||||
| June 30 | December 31, | |||
| 2016 | 2015 | |||
ASSETS | (Unaudited) |
| |||
Current assets - Cash | $ | -- | $ | -- | |
Total assets |
| -- |
| -- | |
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | |||||
Current liabilities | |||||
Accounts payable | $ | 23,215 | $ | 22,015 | |
Accrued expense | 4,000 | 4,000 | |||
Accrued interest | 2,783 | 2,468 | |||
Related party loan (current portion) | 7,500 | 17,500 | |||
Beneficial conversion feature |
| (7,500) |
| (17,500) | |
Total Current Liabilities |
| 29,998 |
| 28,483 | |
Related Party Loan | 10,000 | 10,000 | |||
Loan Discount- Beneficial conversion feature | (10,000) | (10,000) | |||
Total long term liabilities |
| -- |
| -- | |
Total Liabilities |
| 29,998 |
| 28,483 | |
Stockholders' Deficit | |||||
Common stock, $.001 par value, 750,000,000 shares authorized; | |||||
8,505,000 shares issued and outstanding as of |
|
| |||
March 31, 2016 and December 31, 2015, respectively | 8,505 | 8,505 | |||
Additional paid-in capital | 74,389 | 74,389 | |||
Deficit accumulated during the development stage |
| (112,892) |
| (111,377) | |
TOTAL SHAREHOLDERS' DEFICIT |
| (29,998) |
| (28,483) | |
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | -- | $ | -- | |
The accompanying notes are an integral part of these financial statements. | |||||
4
WESTERN LUCRATIVE ENTERPRISES, INC. | ||||||||||||||
(A Developmental Stage Enterprise) | ||||||||||||||
Statements of Operations | ||||||||||||||
For the Period | ||||||||||||||
Three Months Ended | Six Months Ended | July 14, 2008 | ||||||||||||
June 30, | June 30, | (Inception) to | ||||||||||||
2016 |
| 2015 | 2016 |
| 2015 |
| June 30, 2016 | |||||||
|
|
|
|
|
| |||||||||
Net Revenue | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | ||||
Expenses | ||||||||||||||
General and administrative | - | - | - | - | 37,682 | |||||||||
Professional fees |
| 600 |
| 600 |
| 1,200 |
| 1,200 |
| 90,747 | ||||
Total expenses |
| 600 |
| 600 |
| 1,200 |
| 1,200 |
| 128,429 | ||||
Other income (expense) | ||||||||||||||
Other income | -- | -- | -- | -- | 18,938 | |||||||||
Interest expense |
| (158) |
| (155) |
| (315) |
| (312) |
| (3,401) | ||||
Total other income /(expense) |
| (158) |
| (155) |
| (315) |
| (312) |
| 15,537 | ||||
Other comprehensive income (loss) | -- | -- | -- | -- | -- | |||||||||
Net income/(loss) | $ | (758) | $ | (755) | $ | (758) | $ | (755) | $ | (112,892) | ||||
BASIC AND DILUTED LOSS PER SHARE |
| (0.00) |
| (0.00) |
| (0.00) |
| (0.00) | ||||||
Weighted average shares outstanding | ||||||||||||||
OUTSTANDING BASIC | ||||||||||||||
Basic |
| 8,505,000 |
| 8,505,000 |
| 8,505,000 |
| 8,505,000 | ||||||
Diluted |
| 9,595,200 |
| 9,595,200 |
| 9,595,200 |
| 9,595,200 | ||||||
The accompanying notes are an integral part of these financial statements. | ||||||||||||||
5
WESTERN LUCRATIVE ENTERPRISES, INC. | |||||||||
(A Developmental Stage Enterprise) | |||||||||
Statements of Cash Flows | |||||||||
For the Period | |||||||||
Six Months Ended | July 14, 2008 | ||||||||
June 30 | (Inception) to | ||||||||
2016 |
|
| 2015 |
| June 30, 2016 | ||||
|
|
|
| ||||||
Cash Flows from Operating Activities | |||||||||
Net loss | $ | (1,515) | $ | (315) | $ | (112,893) | |||
Adjustments to reconcile net loss to net cash used in operating activities | |||||||||
Issuance of common stock in exchange for services | -- | -- |
| 39,652 | |||||
Non-cash interest-beneficial conversion feature | -- | -- | 616 | ||||||
Changes in operating Assets and Liabilities: | |||||||||
Accounts payable | 1,200 | -- | 20,216 | ||||||
Accrued expense | -- | -- | 4,000 | ||||||
Accrued interest |
| 315 | 315 |
| 2,784 | ||||
Net cash used in operating activities |
| -- |
| -- |
| (45,625) | |||
Cash Flows from Investing Activities |
|
| |||||||
Net cash provided by investing activities |
| -- |
| -- |
| -- | |||
Cash Flows from Financing Activities | |||||||||
Proceeds from related partyvloan | -- | -- |
| 17,500 | |||||
Proceeds from issuance of stock |
| -- | -- | 28,125 | |||||
Net cash provided by financing activities |
| -- |
| -- | 45,625 | ||||
-- | |||||||||
Net increase (decrease) in cash | -- | -- | -- | ||||||
|
|
| |||||||
Cash beginning of period | $ | -- | -- | -- | |||||
Cash end of period | $ | -- | $ | -- | -- | ||||
Supplemental Cash Flow Information: | |||||||||
Interest paid | $ | -- | $ | -- | -- | ||||
Taxes paid | $ | -- | $ | -- | -- | ||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||||
Issuance of common stock for professional and consulting services | $ | -- | $ | -- | $ | 40,452 | |||
Issuance of convertible note with beneficial conversion feature | $ | -- | $ | -- | 7,500 | ||||
The accompanying notes are an integral part of these financial statements. | |||||||||
6
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies of Western Lucrative Enterprises, Inc. (A Development Stage Company) (the “Company”) is presented to assist in understanding the Company’s financial statements. The accounting policies presented in these footnotes conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the accompanying financial statements. These financial statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity. The Company has not realized revenues from its planned principal business purpose and is considered to be in its development state in accordance with ASC 915, “Development Stage Entities”.
Organization, Nature of Business and Trade Name
The Company was incorporated in the State of Iowa on July 14, 2008 and has as a principal business objective of becoming an online landscape design, construction, and consulting service.
The Company intends to develop procedures to make the information given to a prospective purchaser as accurate as possible to lead to the highest percentage of successful Western Lucrative purchases. The Company also intends to focus only on items that can be designed without travel to the location.
Neville Pearson was being appointed as a Director of the Company on August 14, 2010. Subsequently on August 17, 2010, he was appointed as President, Treasurer, and Secretary of the Company.
Concentration of Risk
The Company at times may maintain a cash balance in excess of insured limits. However, as of June 30, 2015, the Company has no cash in excess of insured limits.
Basis of Presentation
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 at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) all valid transactions are recorded and (3) transactions are recorded in the period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the company for the respective periods being presented.
Use of Estimates
The preparation of financial statements in 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 revenues and expenses during the reporting period. A change in managements’ estimates or assumptions could have a material impact on the Company’s financial condition and results of operations during the period in which such changes occurred.
Actual results could differ from those estimates. The Company’s financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with maturity of three months or less to be cash equivalents.
7
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable
Accounts receivable, if any, is carried at the expected net realizable value. The allowance for doubtful accounts, when determined, will be based on management's assessment of the collectability of specific customer accounts and the aging of the accounts receivables. If there were a deterioration of a major customer's creditworthiness, or actual defaults were higher than historical experience, our estimates of the recoverability of the amounts due to us could be overstated, which could have a negative impact on operations.
The Company has been in the developmental stage since inception and has no operation to date. The Company currently does not have any accounts receivable. The above accounting policies will be adopted upon the Company carries accounts receivable.
Property and Equipment
Property and equipment are carried at cost. Expenditures for maintenance and repairs are charged against operations. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.
Depreciation is computed for financial statement purposes on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:
Estimated
Useful Lives
Office Equipment
5-10 years
Copier
5 - 7 years
Vehicles
5-10 years
Website
/ Software
10-15 years
For federal income tax purposes, depreciation is computed under the modified accelerated cost recovery system. For financial statements purposes, depreciation is computed under the straight-line method.
The Company has been in the developmental stage since inception and has no operation to date. The Company currently does not have any property and equipment. The above accounting policies will be adopted upon the Company maintains property and equipment.
Accounts Payable and Accrued expense
The Company has accounts payable and accrued expenses in the amount of $27,215 and $26,015 as of June 30, 2016 and December 31, 2015 respectively.
Revenue and Cost Recognition
The Company intends to provide a landscape design and consulting service via a web site. The Company reports income and expenses on the accrual basis of accounting, whereby income is recorded when it is earned and expenses recorded when they are incurred. The Company currently does not yet have a working website; therefore, it has not realized any sales that would require recognition of revenue.
8
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising
Advertising expenses related to specific jobs are allocated and classified as costs of goods sold. Advertising expenses not related to
specific jobs are recorded as general and administrative expenses. No advertising expense was incurred for the 6 Months ended June 30, 2016 and 2015.
Stockholders’ Equity: Common Stock
The holders of the Company’s common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing for election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of the company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors.
The Company has authorized seven hundred and fifty million (750,000,000) shares of common stock with a par value of $.001. As of June 30, 2016 and December 31, 2015.
In January 2010, the FASB ASC Topic 825, Financial Instruments, requires disclosures about fair value of financial instruments in quarterly reports as well as in annual reports. For the Company, this statement applies to certain investments and long-term debt. Also, the FASB ASC Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.
Various inputs are considered when determining the value of the Company’s investments and long-term debt. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed below.
·
Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets.
·
Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc…).
·
Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).
The Company’s adoption of FASB ASC Topic 825 effectively at the inception did not have a material impact on the Company’s financial statements.
9
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
__________________________________________________________________________________________________________
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The
Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The Company does not have financial assets as an investment carried at fair value on a recurring basis as of June 30, 2015.
The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market
participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment. As of June 30, 2016, the Company has assets and liabilities in cash, various receivables, property and equipment, and various payables. Management believes that they are being presented at their fair market value.
Basic and Diluted Loss per Common Share
Net loss per share is calculated in accordance with SFAS No. 128, "Earnings per Share." The weighted-average number of common shares outstanding during each period is used to compute basic loss per share. Diluted loss per share is computed using the weighted average number of shares and dilutive potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised. We do not calculate loss per diluted shares to prevent understating the actual loss per share
Basic net loss per common share is based on the weighted-average number of share of common stock outstanding since inception. As of June 30, 2015 and since inception, the Company had 8,505,000 common shares outstanding and 9,595,200 dilutive potential common shares.
Basic earnings per share are based on the weighted-average number of shares of common stock outstanding. Diluted earnings per share is based on the weighted-average number of shares of common stock outstanding adjusted for the effects of common stock that may be issued as a result of the following types of potentially dilutive instruments:
·
Warrants,
·
Employee stock options, and
Basic and Diluted Loss per common share (Continued)
·
Other equity awards, which include long-term incentive awards.
The FASB ASC Topic 260, Earnings per Share, requires the Company to include additional shares in the computation of earnings per share, assuming dilution.
Diluted earnings per share are based on the assumption that all dilutive options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options are assumed to be exercised at the time of issuance, and as if funds obtained thereby were used to purchase common stock at the average market price during the period. The Company does not have diluted
10
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
_____________________________________________________________________________________________________
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
effects on common stock as there was no warrant or option issued. Basic and diluted earnings per share are the same as there was no dilutive effect of outstanding stock options for the period ended June 30, 2016. The following is a reconciliation of basic and diluted earnings per share for the 3 Months ended June 30, 2016: | Period Ended June 30, 2016 | ||
Numerator: | |||
Net Loss available to common shareholders | $ | (758) | |
Denominator: | |||
Weighted average shares – basic | 8,505,000 | ||
Weighted average shares – diluted 9,595,200 | |||
Net income (loss) per share – basic and diluted | $ | 0.00 | |
Provision for Income Taxes
We are subject to state and federal income taxes in the U.S. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. In accordance with FASB ASC Topic 740, “Income Taxes,” we provide for the recognition of deferred tax assets if realization of such assets is more likely than not.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board issued the following 18 ASU’s (Accounting Standards Updates) during 2015 and 2016 to date.
Due to the fact that the Company is not yet an operating entity none of these pronouncements have any relevance at this time. Should anyone wish to read further detail, then the full text of these pronouncements can be found at http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1218220137102
Issued In 2015
·
Update No. 2015-18—Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination (a consensus of the Private Company Council)
·
Update No. 2015-17—Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force)
·
Update No. 2015-16—Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force)
11
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
Update No. 2015-15—Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
Update No. 2015-14—Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force)
·
Update No. 2015-13—Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity (a consensus of the FASB Emerging Issues Task Force)
·
·
Update No. 2015-12—Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)
·
Update No. 2015-11—Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures
·
Update No. 2015-10—Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation
·
Update No. 2015-09—Revenue from Contracts with Customers (Topic 606)
o
Section A—Summary and Amendments That Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40)
o
Section B—Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables
o
Section C—Background Information and Basis for Conclusions
o
·
Update No. 2015-08—Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity
·
Update No. 2015-07—Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements (a consensus of the Private Company Council)
·
Update No. 2015-06—Technical Corrections and Improvements Related to Glossary Terms
·
Update No. 2015-05—Service Concession Arrangements (Topic 853) (a consensus of the FASB Emerging Issues Task Force)
·
Update No. 2015-04—Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force)
·
Update No. 2015-03—Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach (a consensus of the Private Company Council)
·
Update No. 2015-02—Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill (a consensus of the Private Company Council)
·
Update No. 2015-01—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects (a consensus of the FASB Emerging Issues Task Force)
12
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended March 31, 2016 and 2015
and for the Period from July 14, 2008 (Inception) to March 31, 2016
_______________________________________________________________________________________________________
Issued In 2016 - to June 30, 2016
·
Update 2016-13—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
·
Update 2016-12—Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
·
Update 2016-11 —Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update)
·
Update 2016-10—Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
·
Update 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
·
Update 2016-08—Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
·
Update 2016-07 —Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting
·
Update 2016-06 —Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force)
·
Update 2016-05—Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the Emerging Issues Task Force)
·
Update 2016-04—Liabilities—Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products (a consensus of the Emerging Issues Task Force)
·
Update 2016-03—Intangibles—Goodwill and Other (Topic 350), Business Combinations (Topic 805), Consolidation (Topic 810), Derivatives and Hedging (Topic 815): Effective Date and Transition Guidance (a consensus of the Private Company Council)
13
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
______________________________________________________________________________________________________
Update 2016-02—Leases (Topic 842)
o
Section A—Leases: Amendments to the FASB Accounting Standards Codification®
o
Section B—Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification®
o
Section C—Background Information and Basis for Conclusions
·
Update 2016-01—Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
·
14
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
NOTE B - 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. However, the Company does not have significant cash or other current assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.
Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to laws or regulations.
Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.
Historically, as the Company has no business revenues, it has mostly relied upon funds contributed by shareholders and associated companies to finance its overheads and research. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.
NOTE C – NOTES PAYABLE & DEBT DISCOUNTS
On December 31, 2013, the Company issued two new Convertible Notes in the amounts of $6,000 and $1,500 to Magellan Capital Partners, Inc. and Savile Town Investments, Inc. respectively.
The chart below summarizes the term of the Notes Payable & Debt Discounts of the Company as of June 30, 2016. The Company is currently in good standing of its promissory notes to Millenium Group, Inc. (“Millenium”), a California corporation, Magellan Capital Partners (“Magellan”) and Savile Town Investments, Inc. (“Savile Town”).
15
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
Terms | Amount |
| |
Notes Payable to Related Party (Millenium): Effective as of August 20, 2010; principal of $10,000 at 2.5% APR; convertible into 4% of fully diluted common shares; due on August 20, 2016, net of unamortized discount related to the debt accretion of $0. Notes Payable to Related Party (Magellan): Effective as of December 31, 2013; principal of $6,000 at 5.0% APR; convertible into 600,000 fully diluted common shares; due on December 31, 2016, net of unamortized discount related to the debt accretion of $0. Notes Payable to Related Party (Savile Town): Effective as of December 31, 2013; principal of $1,500 at 5.0% APR; convertible into 150,000 fully diluted common shares; due on December 31, 2016, net of unamortized discount related to the debt accretion of $0. | $10,000
$6,000 $1,500 |
Convertible Notes to Magellan Capital Partner, Inc. and Savile Town Investments, Inc.
The Company received service through issuing a total of $7,500 convertible notes to Magellan Capital Partners and Savile Town Investments, Inc. In exchange for the $7,500 notes, the two lenders would have an option to receive a total of 750,000 common shares by fully converting these shares at $0.01 per diluted common shares.
In accordance with ASC 470-20, Debt with conversion and other options, as the conversion price of the share is a fixed price at $0.01 per diluted common shares, the beneficial conversion feature or BCF of Notes were calculated based on the intrinsic value. The fair value of the shares at the issuance date, December 31, 2012 was $0.52 and the BCF is $0.51 per share. As the total BCF is greater than the total proceeds of the $7,500 convertible notes, in accordance with ASC 470-20 the BCF is limited to the total proceeds of the convertible notes which is $7,500. We recorded the total convertible value of the notes issued to the Company in the amount of $7,500 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note. We recorded interest expense in the amount of $158 for the 3 Months ended June 30, 2016 in connection with these Notes.
Convertible Note to Millenium Group, Inc.
The original beneficial conversion feature was resulted from a note issued to Millenium Group, Inc. in the amount of $10,000 on August 20, 2010. The note is convertible at holder’s option into 4% of the Company’s fully diluted common shares at the time of conversion, with anti-dilution protection (not adjusted for splits or new issuances), and matures on August 20, 2016.
On August 20, 2015, this note was renewed and the maturity date was extended to August 20, 2016. No beneficial conversion feature occurs with this note renewal since the beneficial conversion feature had been recognized, and had been completely amortized. As of June 30, 2015, there is $1,216 accrued interest which is due on the mature date of note.
16
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
NOTE C – NOTES PAYABLE & DEBT DISCOUNTS (CONTINUED)
As of June 30, 2016, the carrying values of our short-term and long-term notes payable are as follows:
Effective Interest Rate | Principal | Discount | June 30, 2016 | |||||||||
Current notes payable | ||||||||||||
Magallen Group Inc. |
| 5.00 | % |
|
| 6,000 |
|
| 6,000 |
|
| - |
Millenium Group, Inc. | 2.50 | % | 10,000 | 10,000 | - | |||||||
Savile Town Investments, Inc. |
| 5.00 | % |
|
| 1,500 |
|
| 1,500 |
|
| - |
Total short-term notes payable |
|
|
|
| $ | 17,500 |
| $ | 17,500 |
| $ | - |
Long-term notes payable | ||||||||||||
|
|
| - |
|
| - |
|
| - | |||
Total long-term notes payable | $ | - | $ | - | $ | - | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term and long-term notes payable | $ | 17,500 | $ | 17,500 | $ | - | ||||||
As of June 30, 2016, the future principal payments of the above convertibles notes are as follows:
2016 | 17,500 |
|
|
|
|
|
|
|
|
| |
2017 | - |
|
|
|
|
|
|
|
|
| |
Total | $17,500 |
|
|
|
|
|
|
|
|
| |
NOTE D – INCOME TAX
The Company did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Under ACS 740 “Income Taxes,” when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry-forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry-forward period.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the periods ended June 30, 2016 or 2015, applicable under ACS 740. As a result of the adoption of ACS 740, we did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet.
17
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
NOTE D – INCOME TAX (CONTINUED)
>The component of the Company’s deferred tax asset as of June 30, 2016 and 2015 is as follows:
2016 | 2015 | ||
Net operating loss carry forward | 112,892 |
| 106,457 |
Valuation allowance | (112,892) | (106,457) | |
Net deferred tax asset | $ - |
| $ - |
The Company did not pay any income taxes during the periods ended June 30, 2016 or 2015.
The net federal operating loss carry forward will expire in 2032. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.
NOTE E – COMMON STOCK
The Company's articles of incorporation provide for the authorization of seven hundred and fifty million (750,000,000) shares of common stock with par values of $0.001. Common stock holders have all the rights and obligations that normally pertain to stockholders of Iowa corporations. As of June 30, 2016, the Company had 8,505,000 shares of common stock issued and outstanding.
NOTE F – OTHER INCOME
There was no other income during the 3 Months ended June 30, 2016.
NOTE G – RELATED PARTY TRANSACTIONS
The holder (Millenium Group, Inc.) of the $10,000 convertible note is owned by Jonathan Mork who is a son of Dempsey Mork, the owner of Orion Investment which holds more than 5% of the common shares from the Company.
The holder (Magellan Capital Partners) of the $6,000 convertible note is owned by Dempsey Mork owner of MCC Profit Sharing Plan which holds more than 5% of the common shares from the Company.
The holder (Savile Town Investments, Inc.) of the $1,500 convertible note is owned by Neville Pearson a Director of The Company and also its current President, Treasurer, and Secretary.
18
WESTERN LUCRATIVE ENTERPRISES, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months ended June 30, 2016 and 2015
and the Six Months ended June 30, 2016 and 2015
and the Period from July 14, 2008 (Inception) to June 30, 2016
___________________________________________________________________________________________________________
NOTE H - COMMITMENT AND CONTINGENCIES
The Company could become a party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters.
As of the date of this report, there are no material pending legal proceedings to which the Company is a party or of which any of their property is the subject, nor are there any such proceedings known to be contemplated by governmental authorities.
NOTE I – SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred after June 30, 2016 through the date of this filing in accordance with FASB ASC 855 “Subsequent Events”. The Company determined that it does not have any additional subsequent event requiring recording or disclosure.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Certain statements in this report and elsewhere (such as in other filings by the Company with the Securities and Exchange Commission ("SEC"), press releases, presentations by the Company of its management and oral statements) may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and "should," and variations of these words and similar expressions, are intended to identify these forward-looking statements. Actual results may materially differ from any forward-looking statements. Factors that might cause or contribute to such differences include, among others, competitive pressures and constantly changing technology and market acceptance of the Company's products and services. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Western Lucrative Enterprises, Inc. was incorporated on July 14, 2008. As of the date of this document, we have generated no revenues and substantial expenses. This resulted in a net loss of $112,892 since inception, which is attributable to general and administrative expenses plus professional fees. The losses incurred for the six month period to June, 2016 and the six month period to June 30, 2015 were $1,515 and $1,512 respectively. These losses can be attributed to accrued interest on Convertible Notes and accrued professional fees. There are no General & Administrative expenses being incurred other than audit fees. The sole officer provides all necessary administrative services free of charge.
Since incorporation, we have financed our operations primarily through minimal initial capitalization.
To date we have not implemented our planned principal operations.
We do not expect to conduct any research and development.
We do not own any plant or equipment.
Our management does not anticipate any significant changes in the number of employees in the next 12 months. Currently, we believe the services provided by our officers and directors are sufficient at this time.
We have not paid for expenses on behalf of any director. Additionally, we believe that this practice will not materially change.
In 2010, we engaged Millennium Group, Inc to assist the Company with new business strategies and options. Millennium Group is a consulting services firm owned and managed by Jonathan Mork, 47. A pension plan of which his father, Dempsey Mork, is a beneficiary owns more than 5% of our stock. We issued to Millennium Group a $10,000 convertible note as a non-refundable retainer to Millennium Group. We also agreed to pay $400,000 to Millennium if it is able to introduce a major acquisition to the Company. The note is due and payable to Millennium in two years, and bears a 5% interest rate which shall accrue annually and be payable at maturity. At Millennium’s election, this note and any accrued interest can be retired at any earlier time by conversion into common shares. The note is convertible into 4.0% of the Company’s fully diluted common shares at the time of conversion, with full anti-dilution protection (not adjusted for splits or new issuances). The Company has also agreed that any shares issued under this note will have piggyback registration rights. The Board of Directors of the Company has approved and ratified the terms of this note.
Convertible Notes to Magellan Capital Partner, Inc. and Savile Town Investments, Inc. During the Year Ended December 31, 2012, the Company received service through issuing a total of $7,500 convertible notes to Magellan Capital Partners Inc. and Savile Town Investments, Inc. In exchanging for the $7,500 notes, the two lenders would have option to receive a total of 750,000 common shares by fully converting these shares at $0.01 per diluted common shares.
In accordance with ASC 470-20, Debt with conversions and other options, as the conversion price of the share is a fixed price at $0.01 per diluted common shares, the beneficial conversion features or BCF of these Notes were calculated based on the intrinsic value. The fair value of the shares at the issuance date, December 31, 2012 was $0.52 and the BCF is $0.51 per share. As the total BCF is greater than the total proceed of the $7,500 convertible notes, in accordance with ASC 470-20, the BCF is limited to the total proceed of the convertible notes which is $7,500. We recorded the total convertible value of the notes issued to the Company in the amount of $7,500 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note. We recorded interest expense in the amount of $315 for the six months ended June 30, 2016 in connection with these Notes.
20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our president and chief financial officer, carried out an evaluation of the effectiveness of our "disclosure controls and procedures" (as defined in the Exchange Act Rules 13a-15(e) and 15d-15 (e) as of the end of the period covered by this report (the "Evaluation Date"). Based upon that evaluation, the president and chief financial officer concluded that as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (ii) is accumulated and communicated to our management, including our president and chief financial officer, as appropriate to allow timely decisions regarding required disclosure since our auditor had to make audit adjustments. Our management intends to work more closely with our auditors to correct this ineffectiveness.(b) Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-I5(f) and 15(d)-15(f) under the 1934 Act). Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2015. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.
Our management has concluded that, as of June 30, 2016, our internal control over financial reporting was not effective based on these criteria. In its assessment of the effectiveness of internal control over financial reporting as of June 30, 2016, we determined that the following deficiencies constituted a material weakness, as described below.
1.
Certain entity level controls establishing a “tone at the top” were considered material weaknesses. The Company has no audit committee. There is no policy on fraud and no code of ethics at this time. A whistleblower policy is not necessary given the small size of the organization.
2.
Management override of existing controls is possible given the small size of the organization and lack of personnel.
3.
There is no system in place to review and monitor internal control over financial reporting. The Company maintains an insufficient complement of personnel to carry out ongoing monitoring responsibilities and ensure effective internal control over financial reporting.
Management is currently evaluating remediation plans for the above control deficiencies.
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this quarterly report.
21
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There are no material changes in the risk factors set forth in Part 1, Item 1A of the Company’s 10K dated December 31, 2015.
ITEM 2. SELECTED FINANCIAL DATA.
As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we are not required to provide the information required by this item.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. REMOVED AND RESERVED
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
Exhibits Incorporated by Reference or Filed with this Report.
Exhibit No. Description
31.1 Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Ox1ey Act of2002
31.2 Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of2002
32.1 Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of2002.
32.2 Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of2002.
22
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Western Lucrative Enterprises, Inc.
Date: August 22, 2016
By: lsi Neville Pearson
Neville Pearson, President
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: August 22, 2016
By: lsi Neville Pearson
Neville Pearson, President and Director
(Principal Executive Officer)
Date: August 22, 2016
By: lsi Neville Pearson
Neville Pearson, Chief Financial Officer
(Principal Financial and Accounting Officer)
23