U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Mark One 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2015

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________

 

Commission File No. 333-162518

 

KUN DE INTERNATIONAL HOLDINGS INC.

(Name of small business issuer in its charter)

 

Delaware		68-0677444
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

Yihao Ge 41E

Gangyi Haoting Yard, Chuanbu Road

Louhu District, Shenzhen City

Guandong Province, China

(Address of principal executive offices)

 

+86 (755) 8885-5778

(Issuer’s telephone number)

 

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:		Name of each exchange on which registered:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001
(Title of Class)

 

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

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 (Section 229.405 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 x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

 

Class		Outstanding as of June 10, 2015
Common Stock, $0.001		40,677,000

 

 

 

KUN DE INTERNATIONAL HOLDINGS INC.

 

FORM 10-Q

 

FOR THE PERIOD ENDED MARCH 31, 2015

 

INDEX

 

			Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS				3
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements			4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3.	Qualitative and Quantitative Disclosures About Market Risk			15
Item 4.	Controls and Procedures			15
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings			17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			17
Item 3.	Defaults Upon Senior Securities			18
Item 4.	Mine Safety Disclosures			18
Item 5.	Other information			18
Item 6.	Exhibits			20
SIGNATURES				21

 

2

 

Forward-Looking Information

 

This Quarterly Report of Kun De International Holdings Inc. on Form 10-Q contains forward-looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management’s Discussion and Analysis and Plan of Operations,” generally, and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Quarterly Report on Form 10-Q. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

 

3

 

ITEM 1. FINANCIAL STATEMENTS

 

KUN DE INTERNATIONAL HOLDINGS INC.

(A Development Stage Company)

BALANCE SHEETS

 

			March 31,				December 31,
			2015				2014
Assets
Current Assets
	Cash		$	430			$	430
Total Current Assets				430				430
Total Assets				430				430
Liabilities
Current Liabilities
	Accounts payable and accrued expenses			85,028				85,028
	Due to related parties			256,405				164,475
	Convertible note-related party			3,000				3,000
Total Current Liabilities				344,433				252,503
Total Liabilities				344,433				252,503
Stockholders' Deficit
	Common stock, $0.001 par value, 100,000,000 shares authorized, 20,677,000 shares issued and outstanding, respectively			40,707				20,707
	Preferred stock, $0.001 par value, 20,000,000 shares authorized, 0 share issued and outstanding, respectively			-				-
	Additional paid-in capital			20,972,003				991,903
	Subscriptions receivables			(20,000,100	)			-
	Deficit accumulated during development stage			(1,356,613	)			(1,264,683	)
Total Stockholders' Deficit				(344,003	)			(252,073	)
Total Liabilities and Stockholders' Deficit			$	430			$	430

 

The accompanying notes are an integral part of these financial statements

 

4

 

KUN DE INTERNATIONAL HOLDINGS INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

 

			For the three months Ended
			March 31,				March 31,
			2015				2014
Revenues			$	-			$	-
Cost of Sales				-				-
Gross Margin				-				-
Operating Expenses
	Professional Fees			90,735				460
	General & Administrative Expenses			1,195				1,877
Total Operating Expenses				91,930				2,337
Loss from opertions				(91,930	)			(2,337	)
Net Loss before Income Taxes				(91,930	)			(2,337	)
Income Tax Benefit				-				-
Net Loss			$	(91,930	)		$	(2,337	)
Net Loss per Common Share - Basic and Diluted			$	(0.00	)		$	(0.00	)
Weighted Average Number of Common Shares Outstanding - Basic and Diluted				20,707,000				20,707,000

 

The accompanying notes are an integral part of these financial statements

 

5

 

KUN DE INTERNATIONAL HOLDINGS INC.

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' DEFICIT

From December 4, 2008 (Inception) to March 31, 2015

 

			Common Stock						Preferred Stock						Additional Paid-In			Subscriptions Receivables						Common  Stock			Accumulated  Deficit During Development			Total Stockholders
			Shares			Amount			Shares			Amount			Capital			Shares			Amount			Receivables			Stage			Deficit
Balance, December 4, 2008 (Inception)				-		$	-			-		$	-		$	-			-		$	-		$	-		$	-		$	-
	Shares issued to founder's			1,000,000			1,000																								1,000
	Net (loss) for the period																											(2,082	)		(2,082	)
Balance, December 31, 2008				1,000,000			1,000			-			-			-			-			-			-			(2,082	)		(1,082	)
	Shares issued for services ($0.001 per share)			7,500,000			7,500																								7,500
	Shares issued for cash ($0.001 per share)			7,185,000			7,185																								7,185
	Shares issued for cash ($0.10 per share)			1,667,000			1,667									165,033			(56,000	)											166,700
	Shares issued for services ($0.10 per share)			125,000			125									12,375															12,500
	Net (loss) for the period																											(149,674	)		(149,674	)
Balance, December 31, 2009				17,477,000			17,477			-			-			177,408			(56,000	)		-			-			(151,756	)		43,129
	Shares to be issued																					9,000									9,000
	Share subscription received																								231,000						231,000
	Imputed interest															729															729
	Net (loss) for the period																											(217,859	)		(217,859	)
Balance, December 31, 2010				17,477,000			17,477			-			-			178,137			(56,000	)		9,000			231,000			(369,615	)		65,999
	Shares issued for services ($0.20 per share)			120,000			120									23,880															24,000
	Shares issued for subscriptions			1,200,000			1,200									238,800						(9,000	)		(231,000	)					-
	Shares issued for license			1,175,000			1,175									233,825															235,000
	Shares issued for cash			435,000			435									30,565			56,000												31,000
	Shares issued for services			270,000			270									53,730															54,000
	Forgiveness of shareholder loan															201,628															201,628
	Net (loss) for the period																											(699,225	)		(699,225	)
Balance, December 31, 2011				20,677,000			20,677			-			-			960,565			-			-			-			(1,068,840	)		(87,598	)
	Shares issued for services			30,000			30									5,970															6,000
	Forgiveness of shareholder loan															11,357															11,357
	Net (loss) for the period																											(17,357	)		(17,357	)
Balance, December 31, 2012				20,707,000			20,707			-			-			977,892			-			-			-			(1,086,197	)		(87,598	)
	Forgiveness of shareholder loan															9,347															9,347
	Net (loss) for the period																											(9,347	)		(9,347	)
Balance, December 31, 2013				20,707,000			20,707			-			-			987,239			-			-			-			(1,095,544	)		(87,598	)
	Forgiveness of related parties debt															4,664															4,664
	Net (loss) for the period																											(169,139	)		(169,139	)
Balance, December 31, 2014				20,707,000			20,707			-			-			991,903			-			-			-			(1,264,683	)		(252,073	)
	Shares issued for cash									100			-			100						(100	)								-
	Shares issued for cash			20,000,000			20,000									19,980,000						(20,000,000	)								-
	Net (loss) for the period																											(91,930	)		(91,930	)
Balance, March 31, 2015				40,707,000			40,707			100			-			20,972,003			-			(20,000,100	)		-			(1,356,613	)		(344,003	)

 

The accompanying notes are an integral part of these financial statements

 

6

 

KUN DE INTERNATIONAL HOLDINGS INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

 

			For the three months Ended
			March 31,				March 31,
			2015				2014
Cash Flows from Operating Activities
Net Loss			$	(91,930	)		$	(2,337	)
Adjustment to reconcile nt loss from operations:
	Forgiveness of Shareholder Loan			-
Changes in Operating Assets and Liabilities
	Due to related parties			91,930				2,337
Net Cash Used in Operating Activities				-				-
Net Increase (Decrease) in Cash				-				-
Cash at Beginning of Period				430				430
Cash at End of Period			$	430			$	430

 

The accompanying notes are an integral part of these financial statements

 

7

 

Kun De International Holdings Inc.

formerly Secure Luggage Solutions, Inc.

(A Development Stage Company)

Notes to Financial Statements

March 31, 2015

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Kun De International Holdings Inc. formerly Secure Luggage Solutions, Inc. (the "Company") was organized under the laws of the State of Delaware on December 4, 2008.

 

The Company is a development stage enterprise as a global supply chain company. The Company's current business concept is built on the announcement of Chinese President Xi Jinping at the 2014 APEC leaders meeting that China would be fully implementing the global value chain in the Asia-Pacific region, increase spending on capital building and assist developing country members to better integrate into the regional economic integration development value chain in order to realize common development.

 

Basis of Presentation

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

 

The Financial Statements and related disclosures as of December 31, 2014 are audited pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”).

 

Unless the context otherwise requires, all references to “Kun De International Holdings Inc.,” “we,” “us,” “our” or the “company” are to Kun De International Holdings Inc. 

 

NOTE 2 – GOING CONCERN

 

The Company’s financial statements as of March 31, 2015 have been prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company has incurred a cumulative net loss from inception December 4, 2008 through March 31 2015 of $1,356,613.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

  

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Cash and cash equivalents

 

The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

 

Earnings per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. The Company has no potential dilutive instruments, and therefore, basic and diluted earnings (loss) per share are equal. 

 

8

 

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 liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Management believes that the estimates used are reasonable.

 

In Management's opinion all adjustments necessary for a fair statement of the results for the interim periods have been made. All adjustments are normal and recurring.

 

Reclassifications

 

Certain prior year balances have been reclassified to conform to the current year presentation.

 

Revenue Recognition

 

The Company has not recognize any revenues since inception.

 

Fair value of financial instruments

 

ASC 825, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2014.

 

The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accrued liabilities and notes payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value.

 

Stock-based compensation

 

The Company recognizes stock-based compensation in accordance with ASC Topic 718 “Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.

 

Recently Issued Accounting Principles

 

In June 2014, the FASB issued Accounting Standards Update No. 2014-10, "Development Stage Entities" ("ASU 2014-10") which removes the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the update eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. During the year ended December 31, 2014 we elected to early adopt ASU 2014-10. The adoption of this standard allowed the company to remove the inception to date information and all references to development stage.

 

The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.

 

9

 

NOTE 4 – LEGAL MATTERS

 

The Company has no known legal issues pending.

 

NOTE 5 – CAPITAL STOCK

 

On November 26, 2014, World Financial Holdings Group purchased 17,487,000 shares of common stock from the prior shareholder pursuant to a Stock and Note Purchase Agreement dated August 14, 2014. As a result there was a change in control of the Company.

 

On January 22, 2015, the Company’s Board of Directors authorized the issuance of 100 shares of Series A preferred stock to Kun De International Holdings Group, Inc. a corporation organized under the laws of the Cayman Islands ("Kun De") at a per share price of $1.00.

 

On February 9, 2015, the Company’s Board of Directors authorized the issuance of 20,000,000 shares of restricted common stock to Kun De International Holdings Group, Inc. a corporation organized under the laws of the Cayman Islands ("Kun De") at a per share price of $1.00 which resulted in a change in control of the Company.

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

In 2014, the officers paid for expenses of the Company in the amount of $4,664. This amount was allocated to Additional Paid-In Capital.

 

NOTE 7 – CONVERTIBLE NOTE

 

In August of 2014, the Company entered into an agreement for debt of $3,000 to be converted into stock at $0.001 per share or 3,000,000 shares. As there is no market for the stock and it has never traded the derivative calculation is not present.

 

NOTE 8 – INCOME TAX

 

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There are no material uncertain tax positions for any of the reporting periods presented.

 

10

 

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

 

BACKGROUND

 

We were incorporated in the State of Delaware on December 4, 2008 under the name "Secure Luggage Solutions Inc.". On August 14, 2014, our sole officer and director, Donald E. Bauer ("Bauer"), entered into that certain stock and debt purchase agreement dated August 14, 2014 (the "Stock & Debt Purchase Agreement") with World Financial Holdings Group ("World Financial"). In accordance with the terms and provisions of the Stock & Debt Purchase Agreement, the shares were transferred to World Financial and Bauer tendered his resignation as our President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and sole director. Thus there was a change in control.

 

On August 18, 2014, our Board of Directors and the majority shareholders approved an amendment to the articles of incorporation to change our name to "Kun De International Holdings Inc." (the “Name Change Amendment”). The Amendment was filed with the Secretary of State of Delaware on August 21, 2014 changing our name to "Kun De International Holdings Inc." (the "Name Change"). The Name Change was effected to better reflect our future business operations.

 

CURRENT BUSINESS OPERATIONS

 

Through Kun De International Holdings Group, Inc., a corporation organized under the laws of the Cayman Islands ("Kun De"), our business operations have changed to a global supply chain company. Our current business concept is built on the announcement of Chinese President Xi Jinping at the 2014 APEC leaders meeting that China would be fully implementing the global value chain in the Asia-Pacific region, increase spending on capital building and assist developing country members to better integrate into the regional economic integration development value chain in order to realize common development.

 

A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. The idea of the value chain is based on the process view of organizations - the idea of seeing a manufacturing (or service) organization as a system made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes and outputs involve the acquisition and consumption of resources - money, labor, materials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits. (Michael Porter, "Competitive Advantage: Creating and Sustaining Superior Performance"). According to the OECD Secretary-General, the emergence of global value chains in the late 1990s has provided a catalyst for accelerated change in the landscape of international investment and trade with major and far-reaching consequences on governments as well as enterprises. (Angel Gurria, "The Emergence of Global Value Chains: What Do They Mean for Business". November 5, 2012).

 

Management believes that we are the only Chinese company focusing on "N+N" global value chain research, practice and guidance. Management further believes that we have created the fastest and most convenient operating mode built on a closed-loop system that crosses production and finance functions thus creating a global value chain cluster listed platform. Management has applied the results of western research and development of value chain to domestic Chinese companies creating a business platform that assists in control and management of company structure, design, production, logistics, warehousing and distribution of both internal and external resources with minimum risk thus achieving a win-win status.

 

11

 

Kun De is currently registered and headquartered in Shenzhen, China, with the registered capital of 50,000,000 RMB and has an innovative business model with deep cultural implications and strong industrial chain integration and capital operation ability. We are focusing on the global value chain, the integrated and optimization of upstream and downstream industrial chains, logistics, cash flows, business flows and financial to produce a vertical and horizontal integrated closed-loop global business platform.

 

We are currently completing design and implementation of value chain for several clients in several industries, including agriculture, internet, net energy and media cultural. We have designed technical equipment for large-scale agricultural cultivation, developed a company's own online shopping mall, realized agricultural implemented supply chain from growing organic food to serving food on the consumer's table. The chain has also been equipped with excellent production management team, an online shopping mall management team and technical team. The large-scale intensive and standard planting of healthy organic food through the operation of this value chain has made the company stronger for further development.

 

Our culture is to create unique ideas and innovative business models and the development of capital operation. It engages in constructing a safe, healthy and harmonious living environment for future generations and uniting the Chinese people all over the world with the shared value of "Home, the Country and the World", by helping Chinese companies to build brand and grow and become respected international enterprises.

 

RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Quarterly Report. Our reviewed financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

We are a development stage company and have not generated any revenue. We have incurred recurring losses since inception. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

 

SUMMARY COMPARISON OF OPERATING RESULTS

 

		Three Month Period Ended March 31
		2015				2014
Revenues, net		$	-0-			$	-0-
Operating Expenses			91,930				2,337
Loss from Operations			(91,930	)			(2,337	)

 

12

 

Three Month Period Ended March 31, 2015 Compared to Three Month Period Ended March 31, 2014

 

During the three month periods ended March 31, 2015 and March 31, 2014, we did not generate any revenue. During the three month period ended March 31, 2015, we incurred operating expenses of $91,930 compared to $2,337 incurred during the three month period ended March 31, 2014, an increase of $89,593. Operating expenses generally consisted of: (i) professional fees of $90,735 (2014: $460); and (ii) general and administrative expenses of $1,195 (2014: $1,877). The increase in operating expenses was primarily attributable to the increase in professional fees based on the increased scale and scope of our business operations. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs.

 

After deducting operating expense, we realized a net loss for the three month period ended March 31, 2015 of ($91,930) compared to a net loss of ($2,337) during the three month period ended March 31, 2014, an increase of $89,593 due to the factors discussed above. The weighted average number of shares outstanding was 20,707,000 for the three month periods ended March 31, 2015 and March 31, 2014.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Three Month Period Ended March 31, 2015

 

As of March 31, 2015, our current assets were $430 and our current liabilities were $344,433, which resulted in a working capital deficit of $344,003. As of March 31, 2015, current assets were comprised of $430 in cash. As of March 31, 2015, our current liabilities were comprised of: (i) $85,028 in accounts payable and accrued expense; (ii) $256,405 due to related parties; and 9iii) $3,000 in convertible note-related party.

 

There was no decrease or increase in total assets during the three month period ended March 31, 2015 from fiscal year ended December 31, 2014.

 

There was an increase in total liabilities of $91,930 from fiscal year ended December 31, 2014 primarily due to the increase in amounts due to related parties.

 

Cash Flows from Operating Activities

 

For the three month periods ended March 31, 2015 and March 31, 2014, net cash flows used by operating activities was $-0- . During the three month period ended March 31,. 2015, net cash flows used in operating activities consisted primarily of a net loss of $91,930 (2014: $2,337), which was changed by an increase of ($91,930) (2014: $2,337) in amounts due to related parties.

 

Cash Flows from Investing Activities

 

For the three month periods ended March 31, 2015 and March 31, 2014, net cash flows used in investing activities was $-0-.

 

13

 

Cash Flows from Financing Activities

  

For the three month periods ended March 31, 2015 and March 31, 2014, net cash flows from financing activities was $-0-.

 

MATERIAL COMMITMENTS

 

On January 22, 2012, we received a loan of $3,000 from Raoul Taylor for working capital purposes. We have memoralized the loan in a convertible promissory note dated August 13, 2014 (the "Convertible Note"), which Convertible Note was acquired pursuant to the terms and provisions of the Stock & Debt Purchase Agreement. The Convertible Note is convertible into shares of our common stock at a conversion price of $0.001 per share.

 

As of March 31, 2015, we owe related parties an aggregate $256,405. These amounts relate to loans made to us by related parties for working capital.

 

PURCHASE OF SIGNIFICANT EQUIPMENT

 

We do not intend to purchase any significant equipment during the next twelve months.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

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

 

GOING CONCERN

 

The independent auditors' report accompanying our December 31, 2014 and December 31, 2013 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. We have suffered recurring losses from operations, have a working capital deficit and are currently in default of the payment terms of certain note agreements. These factors raise substantial doubt about our ability to continue as a going concern.

 

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RECENTLY ISSUED ACCOUNTING STANDARDS

 

We have reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations other than in respect of the early adoption of the new regulations relating to Development Stage Entities as discussed in the footnotes to our financial statements.

 

OFF-BALANCE SHEET ARRANGEMENTS.

 

We have no off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of disclosure controls and procedures.

 

We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective.

 

Management’s report on internal control over financial reporting.

 

Our chief executive officer and our chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

	·	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
	·	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and
	·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

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Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Based on our assessment, our chief executive officer and our chief financial officer believe that, as of March 31, 2015, our internal control over financial reporting is not effective based on those criteria, due to the following:

 

●

Deficiencies in Segregation of Duties. Lack of proper segregation of functions, duties and responsibilities with respect to our cash and control over the disbursements related thereto due to our very limited staff, including our accounting personnel.

 

●

Lack of an audit committee and deficiency in the staffing of our financial accounting department. The number of qualified accounting personnel with experience in public company SEC reporting and GAAP is limited. This weakness does not enable us to maintain adequate controls over our financial accounting and reporting processes regarding the accounting for non-routine and non-systematic transactions. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, by this shortage of qualified resources.

  

In light of this conclusion and as part of the preparation of this report, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (1) this report does not contain any untrue statement of a material fact or omit to state a material face necessary to make the statements made not misleading with respect to the period covered by this report, and (2) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows for the periods then ended.

 

This 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 the rules of the SEC that permit us to provide only management’s report in this report.

 

Changes in internal control over financial reporting.

 

There were no significant changes in our internal control over financial reporting during the first quarter ended March 31, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

AUDIT COMMITTEE

 

Our board of directors has not established an audit committee. The respective role of an audit committee has been conducted by our board of directors. When established, the audit committee's primary function will be to provide advice with respect to our financial matters and to assist our board of directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

 

ITEM 1A. RISK FACTORS

 

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

 

During the three month period ended March 31, 2015, we issued an aggregate of 20,000,000 shares of unregistered common stock and 100 Series A preferred shares as follows.

 

Common Stock

 

On February 9, 2015, we authorized the issuance of an aggregate 20,000,000 shares of our restricted common stock to Kun De International Holdings Group, a corporation organized under the laws of the Cayman Islands ("Kun De") at a per share price of $0.001. The 20,000,000 shares were issued in a private transaction to one-United States resident in reliance on Regulation S promulgated under the Securities Act. The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. Kun De acknowledged that the securities to be issued have not been registered under the Securities Act, that it understood the economic risk of an investment in the securities, and that it had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.

 

Preferred Stock

 

On January 22, 2015, we authorized the issuance of an aggregate 100 shares of our Series A preferred stock at a per share price of $1.00 to Kun De. The 100 shares were issued in a private transaction to one non-United States resident in reliance on Regulation S promulgated under the Securities Act. The shares of Series A preferred stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. Kun De acknowledged that the securities to be issued have not been registered under the Securities Act, that it understood the economic risk of an investment in the securities, and that it had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.

 

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

No senior securities were issued and outstanding during the nine months ended September 30, 2014.

 

ITEM 4. MINE SATEFY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

DESIGNATION OF SERIES A PREFERRED STOCK

 

Effective January 5, 2015, our Board of Directors of Kun De International Holdings Inc., a Delaware corporation (the "Company") approved the designation of 1,000 shares of series A preferred stock with a par value of $0.001 (the "Designation of Series A Preferred Stock"). The Designation of Series A Preferred Stock was filed with the Delaware Secretary of State on January 21, 2015. The Designation provides for certain rights and preferences as follows:

 

Conversion Rights

 

If at least one share of Series A Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series A Preferred Stock at any given time, regardless of their number, shall be convertible into the number of shares of common stock which equals four times the sum of: i) the total number of shares of common stock which are issued and outstanding at the time of conversion, plus ii) the total number of shares of Series B and Series C Preferred Stocks which are issued and outstanding at the time of conversion. The stock certificate(s) evidencing the common stock shall be issued with a restrictive legend indicating that it was issued in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), and that it cannot be transferred unless it is so registered, or an exemption from registration is available, in the opinion of counsel to us.

 

Each individual share of Series A Preferred Stock shall be convertible into the number of shares of common stock equal to:

 

[four times the sum of: {all shares of common stock issued and outstanding at time of conversion + all shares of Series B and Series C Preferred Stocks issued and outstanding at time of conversion}]

divided by:

[the number of shares of Series A Preferred Stock issued and outstanding at the time of conversion]

 

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Voting Rights

 

If at least one share of Series A Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series A Preferred Stock at any given time, regardless of their number, shall have voting rights equal to four times the sum of: i) the total number of shares of common stock which are issued and outstanding at the time of voting, plus ii) the total number of shares of Series B and Series C Preferred Stocks which are issued and outstanding at the time of voting.

 

Each individual share of Series A Preferred Stock shall have the voting rights equal to:

 

[four times the sum of: {all shares of Common Stock issued and outstanding at time of voting + all shares of Series B and Series C Preferred Stocks issued and outstanding at time of voting}]

divided by:

[the number of shares of Series A Preferred Stock issued and outstanding at the time of voting]

 

Liquidation Rights

 

Upon any liquidation, dissolution or our winding up, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any stock ranking junior to the Series A Preferred Stock, the holders of the Series A Preferred Stock shall be entitled to be paid out of our assets an amount equal to $1.00 per share (the “Preference Value”), plus all declared but unpaid dividends, for each share of Series A Preferred Stock held by them. After the payment of the full applicable Preference Value of each share of the Series A Preferred Stock as set forth herein, the remaining assets of our legally available for distribution, if any, shall be distributed ratably to the holders of our common stock.

 

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ITEM 6. EXHIBITS

 

The following exhibits are filed as part of this Quarterly Report

 

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)	Financial Statements.

 

(b)	Exhibits required by Item 601.

 

Exhibit
Number		Description
(3)		Articles of Incorporation and By-laws
3.1		Certificate of Incorporation (incorporated by reference from our Registration Statement on Form S-1 filed on October 16, 2009)
3.2		Bylaws (incorporated by reference from our Registration Statement on Form S-1 filed on October 16, 2009)
3.3		Certificate of Amendment (incorporated by reference from our Current Report on Form 8-K filed on April 5, 2011)
3.4		Certificate of Amendment to the Articles of Incorporation (incorporated by reference from our Current Report on Form 8-K filed on January 2, 2015).
10.1		Agency Fee Agreement with AMF Services Inc. (incorporated by reference from our Registration Statement on Form S-1 filed on October 16, 2009)
10.2		Turner Key Consulting Agreement (incorporated by reference from our Registration Statement on Form S-1 filed on October 16, 2009)
10.3		Air Consult Associates Agreement dated June 29, 2009 (incorporated by reference from our Registration Statement on Form S-1 filed on October 16, 2009)
10.4		Air Consult Associates Agreement dated November 17, 2009 (incorporated by reference from our Registration Statement on Form S-1/A filed on January 8, 2010)
10.5		Consulting Agreement with Moody Capital, LLC and Moody Capital Solutions Inc. dated December 22, 2009 (incorporated by reference from our Registration Statement on Form S-1 filed on April 14, 2010)
10.6		Exclusive License Agreement dated November 7, 2010 (incorporated by reference from our Registration Statement on Form 8-K filed on November 15, 2010)
10.7		Agreement with Chenergy Service Inc. dated February 14, 2011 (incorporated by reference from our Registration Statement on Form 8-K filed on February 17, 2011)
10.8		2011 Stock option plan dated March 31, 2011 (incorporated by reference from our Current Report on Form 8-K filed on April 6, 2011)
10.9		Form of Stock Option Agreement (incorporated by reference from our Current Report on Form 8-K filed on April 6, 2011)
10.10		2015 Flexible Stock Option Plan of Kun De International Holdings Inc. (incorporated by reference from our S-8 registration statement filed on February 10, 2015).
16.1		Letter from Terry L. Johnson dated April 23, 2015 (incorporated by reference from our Current Report on Form 8-K filed on April 23, 2015).
31.1*		Section 302 Certification of Chief Executive Officer.
31.2*		Section 301 Certification of Chief Financial Officer
32.1*		Section 906 Certification of Chief Executive Officer.
32.2*		Section 906 Certification of Chief Financial Officer.
101*		XBRL Interactive Data File.

__________ 

*Filed herewith

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

 

 

	KUN DE INTERNATIONAL HOLDINGS INC.
Date: June 17, 2015	By:	/s/ Shuquan Chen
		Shuquan Chen
		Chief Executive Officer
		(Principal executive officer, principal financial officer, and principal accounting officer)

 

 

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