UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

 

For the quarterly period ended: March 31, 2016

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

For the transition period from ____________ to _____________

 

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 mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ No ☐

As of May 4, 2016, there were 30,755,000 shares of common stock outstanding.

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PART I – FINANCIAL INFORMATION

SICHUAN LEADERS PETROCHEMICAL COMPANY

BALANCE SHEETS

The accompanying notes are an integral part of these financial statements

SICHUAN LEADERS PETROCHEMICAL COMPANY

STATEMENTS OF OPERATIONS

		Three months Ended March 31,
		2016 (unaudited)				2015 (unaudited)
Revenue:		$	-			$	-
Operating Expenses:
General and Administrative			19,056				27,466
Operations Loss, Pre Tax			(19,056	)			(27,466	)
Net Loss Continued Operations			(19,056	)			(27,466	)
Other Income and (Expense)
Net Interest			(2,435	)			(905	)
Net Loss		$	(21,491	)		$	(28,371	)
Basic and Diluted Net (Loss) per share:
Continuing Operations			(0.00	)			(0.00	)
Weighted average number of shares outstanding; Basic and Diluted			30,755,000				30,755,000

 

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

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Impairment of Long-Lived Assets

FASB ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We assess the potential impairment of long-lived assets, principally property and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We determine if there is impairment by comparing undiscounted future cash flows from the related long-lived assets with their respective carrying values. In determining future cash flows, significant estimates are made by us with respect to future operating results of the restaurant over its remaining lease term. If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset carrying amount exceeds its fair value. This process of assessing fair values requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment charges for these assets. The Company owned no long-lived assets as of March 31, 2016 or December 31, 2015.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Stock-Based Compensation

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718.  ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees.  The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition provisions ASC Topic 505-50.  The Company estimates the fair value of stock options at the grant date by using the Black-Scholes option-pricing model. No stock based compensation was issued or outstanding during the three month periods ended March 31, 2016 or 2015.

Net Earnings (Loss) Per Share

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. No potentially dilutive debt or equity instruments were issued and outstanding during the three month periods ended March 31, 2016 and 2015.

Recent Accounting Pronouncements

We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company financial statements.

In February 2015, the majority shareholder loaned the company $110,000 to fund the operations of the company. The outstanding principal of this Note and all interest accrued thereon shall be due and payable in full in one lump sum payment upon the earlier of: (a) February 27, 2017; and (b) a Change of Control.

 

As of March 31, 2016 and December 31, 2015, the Company has net operating losses from operations. The carry forwards expire through the year 2029. The Company’s net operating loss carry forward may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. A valuation allowance has been applied due to the uncertainty of realization.

 

The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying the United States Federal tax rate of 34% and State tax rate of 3.3% to income before taxes), as follows:

US Dollars $		Three Month Period Ended March 31, (Unaudited)
		2016				2015
Tax Expense (benefit) at the Statutory Rate		$	(7,307	)		$	(9,600	)
State Income Taxes, Net of Federal Income Tax Benefit			(710	)			(940	)
Change in Valuation allowance			(8,017	)			(10,540	)
Total		$	-			$	-

The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

 

A valuation allowance has been applied due to the uncertainty of realization.

 

As of March 31, 2016 and March 31, 2015, the Company has net operating losses from operations. The carry forwards expire through the year 2023. The Company’s net operating loss carry forward may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. A valuation allowance has been applied due to the uncertainty of realization.

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The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed elsewhere in this report.

Overview

Sichuan Leaders Petrochemical Company (“we,” “us,” “our” or the “Company”) was incorporated in the State of Florida on June 29, 2000 under the name Quality Wallbeds, Inc. In December 2012, we changed our name in anticipation of new business opportunities. From our inception through May 2013, we provided quality space saving custom home furniture and closet organizing systems to the general public. We discontinued our wall bed operations on May 21, 2013.

We are exploring various opportunities, including the petrochemical field, to determine our best strategic business direction. Since the change in the business model, current management has seen a direct impact on our revenues. Future cash flows, if any, are impossible to predict at this time. We may raise cash from sources other than our operations. Our only other source for cash at this time is investments by others in the Company or our sole director and executive officer, Andy Z. Fan. Any change in our strategic business direction may take years to complete and future cash flows, if any, are impossible to predict at this time.

Results of Operations

The following table provides a comparison of a summary of our results of operations for the three month periods ended March 31, 2016 and 2015.

 

		Three Months Ended March 31, (Unaudited)
		2016				2015				% Change
Revenue		$	-			$	-				0	%
General and Administrative Expense – related party			5,989				19,050				69	%
General and Administrative Expense		$	13,067			$	8,416				(88	%)
Loss from Operations		$	(19,056	)		$	(27,466	)			25	%
Other Income and (Expense)
Net Interest			(2,435	)			(905	)			(169	%)
Net Loss		$	(21,491	)		$	(28,371	)			25	%

 

Revenue from Operations

For the three month period ended March 31, 2016 and March 31, 2015, total sales were $0 as we have not commenced revenue generating operations following the discontinuance of our Florida wall bed operation in May 2013.

General and Administrative Expenses– Related Party

For the three month period ended March 31, 2016 and March 31, 2015, related party operating expenses were $5,989 and $19,050, respectively. The decrease in expenses between the two periods is directly related to the management fees paid to the Service Provider. During the three month period ended March 31, 2016 the contract was renewed and the Service Provider agreed to reduce the management fee to $1,996 as compared to $6,350 during the three month period ended March 31, 2015.

General and Administrative Expenses

Net Income (Loss)

As a result of the factors described above, there was a net loss of ($21,491) and ($28,371) for the three month period ended March 31, 2016 and 2015, respectively.

 

Liquidity and Capital Resources

General.

At March 31, 2016, we had cash and cash equivalents of $57,833. We have historically met our cash needs through cash flows from operating activities. However, since the discontinuation of our Florida wall bed operation the controlling shareholders have pledged to continue their support to fund the continuing operations, as necessary. Our cash requirements are generally for general and administrative activities. We have raised capital through officer loans during the current previous fiscal year. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements and therefore we will require additional funding through officer loans.

In the event we are unable to generate sufficient funds to continue our business efforts or if we are pursued by a larger company for a business combination, we will analyze all strategies to continue the Company and maintain or increase shareholder value. Under these circumstances, we would consider a merger, acquisition, joint venture, strategic alliance, a roll-up, or other business combination for the purposes of continuing the business and maintaining or increasing shareholder value. Management believes its responsibility to maintain shareholder value is of paramount importance, which means we should consider the aforementioned alternatives in the event funding is not available on favorable terms to us when needed.

Operating activities

Our continuing operating activities used cash of ($10,548) and of ($27,526) for the three month period ended March 31, 2016 and 2015, respectively.

Investing Activities

We neither generated nor used funds in continuing investing activities during the three month period ended month period ended March 31, 2016 or 2015.

Financing activities

Cash provided in our financing activities was $0 for the three month period ended March 31, 2016, compared to cash provided of $110,000 during the comparable period in 2015. During the three month period ended March 31, 2015, the majority shareholder loaned the company $110,000.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We had no ongoing business or other source of income and incurred a net loss of ($21,491) for the three month period ended March 31, 2016. These factors raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.

We are currently evaluating acquisitions and other business opportunities. The ability to continue as a going concern is dependent upon us generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. No assurance can be given that we will be successful in these efforts.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

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We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

Inflation

Inflation does not materially affect our business or the results of our operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

We prepare our financial statements in accordance with generally accepted accounting principles of the United States (“GAAP”). GAAP represents a comprehensive set of accounting and disclosure rules and requirements. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates. We use historical data to assist in the forecast of our future results. Deviations from our projections are addressed when our financials are reviewed on a monthly basis. This allows us to be proactive in our approach to managing our business. It also allows us to rely on proven data rather than having to make assumptions regarding our estimates.

Recent Accounting Pronouncements

We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company financial statements.

 

 We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K, and as such are not required to provide the information contained in this item pursuant to Item 305 of Regulation S-K.

 

Disclosure Controls and Procedures.

 

 

PART II – OTHER INFORMATION

 

 

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*	Incorporated herein by reference to Sichuan Leaders Petrochemical Company’s Registration Statement on Form S-1 filed with the SEC on August 7, 2012.
**	Incorporated herein by reference to Sichuan Leaders Petrochemical Company’s Current Report on Form 8-K filed with the SEC on December 21, 2012.
***	Incorporated herein by reference to Sichuan Leaders Petrochemical Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2016.

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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.