---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

 

Commission file number:  001-13621

 

UPD HOLDING CORP.

(Exact name of Registrant as specified in its charter)

 

 

75 Pringle Way, 8th Floor, Suite 804

Reno, Nevada 89502

(Address of principal executive offices, including zip code)

 

775-829-7999

(Registrant’s telephone number, including area code)

 

 

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 þ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No ☐

 

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

   

   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.   ☐           

 

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

 

As of May 15, 2017, the issuer had 79,766,636 shares of Common Stock outstanding, par value $.005 per share.

 

---

 

 

UPD HOLDING CORP.

 

TABLE OF CONTENTS

 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

 

The statements contained in this Quarterly Report on Form 10-Q that are not historical fact are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  The forward-looking statements contained herein are based on current expectations that involve a number of risks and uncertainties.  These statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” or “anticipates,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties.  Investors are cautioned that these forward-looking statements that are not historical facts are only predictions.  No assurances can be given that the future results indicated, whether expressed or implied, will be achieved. Because of the number and range of assumptions underlying the Company’s projections and forward-looking statements, many of which are subject to significant uncertainties and contingencies that are beyond the reasonable control of the Company, some of the assumptions inevitably will not materialize, and unanticipated events and circumstances may occur subsequent to the date of this report.  These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information.  Therefore, the actual experience of the Company and the results achieved during the period covered by any particular projections or forward-looking statements may differ substantially from those projected.  The inclusion of projections and other forward-looking statements should not be regarded as a representation by the Company or any other person that these estimates and projections will be realized, and actual results may vary materially.  There can be no assurance that any of these expectations will be realized or that any of the forward-looking statements contained herein will prove to be accurate.

 

 

 

UPD HOLDING CORP.

AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

 

		March 31,				June 30,
		2017				2016
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	66,037			$	1,619
Total Current Assets			66,037				1,619
TOTAL ASSETS		$	66,037			$	1,619
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts Payable		$	39,188			$	27,271
Accrued Interest			65,358				360
Accrued Liabilities			5,400				5,400
Convertible Notes Payable - Related Party			15,000				—
Convertible Notes Payable			50,000				—
Total Current Liabilities			174,946				33,031
TOTAL LIABILITIES		$	174,946			$	33,031
STOCKHOLDERS’ DEFICIT:
Common stock, $.005 par value 200,000,000 authorized: 79,766,636 and 78,766,636 shares issued and outstanding as of March 31, 2017 and June 30, 2016, respectively			398,833				393,833
Preferred stock, $.01 par value 10,000,000 authorized: 0 shares issued and outstanding as of March 31, 2017 and June 30, 2016, respectively		—					—
Additional paid-in capital			(265,405	)			(285,405	)
Accumulated deficit			(242,337	)			(139,840	)
TOTAL STOCKHOLDERS’ DEFICIT			(108,909	)			(31,412	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	66,037			$	1,619

 

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

 

 

UPD HOLDING CORP.

AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) 

 

 

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

 

 

UPD HOLDING CORP.

AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

 

    

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

 

UPD HOLDING CORP.

AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES; GOING CONCERN

 

Business, Operations and Organization

 

Esio Water & Beverage Development Corp. was incorporated in Nevada in June 1988 as Richard Barrie Fragrances, Inc. Over the years, the Company changed its name several times, most recently from Tempco, Inc. to Esio Water & Beverage Development Corp. Esio Water & Beverage Development Corp. and its wholly-owned subsidiaries Net Edge Devices, LLC, an Arizona Limited Liability Company, and iMetabolic Corp, (“IMET”) a Nevada Corporation are hereinafter collectively referred to as the “Company.”

 

On March 16, 2015, the Company issued to the IMET 16 shareholders of record an aggregate of 60,000,000 shares, or 76.2% of the Company’s common stock. Prior to the close of the reverse merger, IMET had 10,000,000 common shares outstanding immediately prior to the merger and net liabilities of $20,500. Prior to closing, the predecessor company had 18,566,636 shares outstanding and net assets of $89,615, of which $85,378 was cash and $4,237 was non-cash. As a result of the closing of this transaction, IMET is now a wholly owned subsidiary of the Company and its business and operations represent those of the Company

 

For accounting purposes, this transaction is being accounted for as a reverse merger and has been treated as a recapitalization of the Company with IMET considered the accounting acquirer, and the financial statements of the accounting acquirer become the financial statements of the registrant. This transaction is hereinafter referred to as the “Reverse Merger.” The Company did not recognize goodwill or any intangible assets in connection with the transaction. The 60,000,000 common shares issued to the shareholders of IMET in conjunction with the share exchange transaction have been presented as outstanding for all periods.

 

On December 30, 2015, the Company filed Articles of Merger (the “Merger”) with the Nevada Secretary of State. The Merger was between the Company and our wholly-owned subsidiary, UPD Holding Corp. (the “Subsidiary”). Pursuant to Nevada corporate law, we amended our Articles of Incorporation by the Merger to change our name to UPD Holding Corp. We believe our new name more properly indicates our current lines of business because the Company has not been in the water and beverage industry since 2012. “UPD” stands for United Product Development.

 

Beneficial Conversion Feature

 

The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.

 

Going Concern

 

The Company’s unaudited interim consolidated 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. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.  If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (i) obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses; (ii) obtaining funding from outside sources through the sale of its debt and/or equity securities; and (iii) completing a merger with or acquisition of an existing operating company. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

 

Unaudited Interim Financial Statements

 

The preparation of the Company’s unaudited interim consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from these estimates.

 

NOTE 2 – RELATED PARTY TRANSACTIONS

 

For the nine months ended March 31, 2017, the President has provided the Company rent at no charge.

 

On September 1, 2016, through unanimous approval by its Board, the Company opened an escrow to initiate a proposed funding arrangement for future capital demands. The related party portion of this escrow consists of a $15,000 convertible Note held by the Company’s President which matured March 1, 2017. As a result of this date expiring, the President extended the maturity of the note to September 1, 2017.  If not repaid by maturity, the note is convertible into 1,200,000 common shares at $0.0125 per share. If share conversion is not elected, then interest will be due in the amount of $15,000.

As of March 31, 2017, we owed Mr. Conte $3,366 in administrative expenses paid on our behalf. The amount is recorded in accounts payable and is due upon demand and non-interest bearing.

The Company analyzed the conversion option in the notes for derivative accounting treatment under ASC Topic 815, “Derivatives and Hedging” and determined that the instrument does not qualify for derivative accounting.

 

The Company therefore performed an analysis to determine if the conversion option was subject to a beneficial conversion feature and determined that the instrument does have a beneficial conversion feature equivalent. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.

 

NOTE 3 – STOCKHOLDERS’ EQUITY

 

Authorized Shares

 

At March 31, 2017, our authorized capital stock consists of 200,000,000 shares of Common Stock, par value of $.005, and 10,000,000 shares of Preferred Stock, par value $.01. The Company’s Board of Directors has the authority to divide the preferred stock shares into series and to fix the voting powers, designation, preference, and relative participating, option or other special rights, and the qualifications, limitations, or restrictions of the shares of any series so established. 

 

Common Stock

 

At March 31, 2017 and 2016, there were 79,766,636 and 78,766,636 shares of Common Stock issued and outstanding, respectively.

 

At March 31, 2017, we had a total of 9,508,245 shares reserved for issuance pursuant to the 1,352,767 outstanding options and 8,155,478 outstanding warrants issued by the predecessor company. See “Options and Warrants” below for additional information.

 

On July 1, 2016, the Company sold 1,000,000 shares of its common stock at $0.025 per share in a private placement to raise an additional $25,000 of working capital.

 

 

Preferred Stock

 

The Company has not issued any shares of preferred stock as of March 31, 2017.

 

Options and Warrants

 

The Company did not issue any options or warrants during the nine months ended March 31, 2017.

 

As of March 16, 2015, the effective date of the Reverse Merger, the Company had 3,522,767 options outstanding pursuant to the predecessor company’s 1999 Equity Compensation Plan, of which 2,170,000 options have expired, leaving 1,352,767 options outstanding as of March 31, 2017.

 

In addition, as of the effective date of the Reverse Merger, the Company had 8,155,478 warrants outstanding issued by the predecessor company. These warrants expire in 2017.

 

Additional information about the predecessor company’s options and warrants and expense calculations can be found in that company’s financial statements contained in its Annual Report on Form 10-K filed with the SEC on October 14, 2014 and in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 filed with the Securities and Exchange Commission on October 13, 2016.

 

NOTE 4 – CONVERTIBLE NOTE

 

On September 1, 2016, through unanimous approval by its Board, the Company opened an escrow to initiate a proposed funding arrangement for future capital demands. A single private placement provided $50,000 of this escrow in the form of a convertible note. This convertible note matured on March 1, 2017. As a result of this date expiring, the single private placement has executed a six-month taking the mature date out to September 1, 2017. If not repaid by maturity, the note is convertible into 4,000,000 common shares at $0.0125 per share. If share conversion is not elected, then interest will be due at the face value of the original note of $50,000.

 

The Company analyzed the conversion option in the notes for derivative accounting treatment under ASC Topic 815, “Derivatives and Hedging” and determined that the instrument does not qualify for derivative accounting.

 

The Company therefore performed an analysis to determine if the conversion option was subject to a beneficial conversion feature and determined that the instrument does have a beneficial conversion feature equivalent. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.

 

 

 

The following management discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim consolidated financial statements and related notes which are included in Item 1 of this Quarterly Report on Form 10-Q, and with our audited financial statements included in our Form 10-K for the fiscal year ended June 30, 2016, filed with the Securities and Exchange Commission on October 13, 2016.

 

Overview

 

Acquisition of iMetabolic Corp.

 

On December 31, 2014, we entered into an Agreement of Share Exchange and Plan of Reorganization (the “Share Exchange Agreement”) and consummated a share exchange (the “Share Exchange”) with iMetabolic Corp. (“IMET”), a Nevada corporation.  The Effective Date of the transaction was March 16, 2015 (the “Effective Date”) and resulted in the acquisition of IMET (the “Acquisition”).  Pursuant to the terms of the Share Exchange Agreement, we acquired all of the outstanding capital stock of IMET from the 16 IMET shareholders for an aggregate of 60,000,000 shares, or 76.2% of the Company’s common stock.

 

As a result of the Share Exchange Agreement, the IMET shareholders transferred all their interest in IMET to the Company and, as a result, IMET became a wholly owned subsidiary of the Company.

 

As a further condition of the Share Exchange Agreement, the then current officers of the Company resigned on March 16, 2015 and Mark W. Conte was appointed President, CEO and a director of the Company, Kevin J. Pikero as CFO, Treasurer, Secretary, and a director and Andrew D. Smith as a director.

 

The IMET acquisition is discussed more fully in the Form 8-K we filed with the Securities and Exchange Commission (“SEC”) on March 20, 2015. Included as an exhibit to that Form 8-K is a copy of the Share Exchange Agreement.

 

Name Change

 

On December 30, 2015, the Company filed Articles of Merger (the “Merger”) with the Nevada Secretary of State. The Merger was between the Company and our wholly-owned subsidiary, UPD Holding Corp. (the “Subsidiary”). Pursuant to Nevada corporate law, we amended our Articles of Incorporation by the Merger to change our name to UPD Holding Corp. We believe our new name more properly indicates our current lines of business because the Company has not been in the water and beverage industry since 2012. “UPD” stands for United Product Development which is the name of one of our wholly-owned subsidiaries. On March 1, 2017, FINRA successfully grated the company a new trading symbol (UPDH).

    

IMET Products

 

IMET was  formed on July 1, 2013 for the purpose of marketing products under the brand “iMetabolic” that were previously being sold by the brand’s licensor, International Metabolic Institute LLC (“IMI”), as well as to develop new products that would be specifically suited for a national marketing plan.  IMI transferred certain product and trademark rights to IMET on July 22, 2013 (the “License”).  The License was amended on March 16, 2015 to clarify IMET’s and IMI’s future rights. See “IMET License Agreement” below. The mission of IMET is to build upon preexisting brand equity and the expert copy and other literature authored by Dr. Kent Sasse as applied to the national launch of products with extraordinary profitability and novel market appeal.

 

A pre-existing line of five (5) soft-bound books authored by the founder of the iMetabolic brand, Dr. Kent Sasse, is available for sale under the brand “A Sasse Guide” on both the www.imetabolic.com and www.sasseguide.com websites. These books are titled: (i) Life-Changing Weight Loss; (ii) Doctor’s Orders – 101 Medically Proven Tips for Losing Weight; (iii) Outpatient Weight Loss Surgery – Safe and Successful Weight Loss with Modern Bariatric Surgery; (iv) Weight-Loss Surgery – Which One is Right for You?; and (v) After Weight Loss Surgery.  Pursuant to the terms of the License Amendment these books will continue to be the property of and sold by IMI. 

 

A pre-existing line of products, including, but not limited to, proprietary blend meal replacements, dietary specialty foods, and nutraceuticals, have been sold by IMI at IMI’s company store / doctor’s office pursuant to a reservation of rights in the License and online at www.imetabolic.com.  An amendment to the License provides that after IMI has sold its entire inventory existing or ordered on March 16, 2015, IMI will not sell any more products which may be deemed to compete with IMET’s products.

 

 

IMET has developed the following four new products to be marketed:

 

 

 

 

 

We believe IMET’s current four products can be successfully marketed through the use of infomercials and have made progress with identifying a creator and producer for an infomercial to sell the products. Additionally, the Company is building a new website with e-commerce capabilities and plans to use SEO (search engine optimization), social media, e-mail marketing, and PPC (pay for click) venues as well to drive the business. However, there is no assurance IMET’s infomercial marketing strategy will be successful.

 

We have also investigated using regional distributors for our products and may use them in the future, on a region by region basis as working capital permits. The Company has identified some prospects and is working to move those prospects forward.

 

We believe IMET has located experienced nutrition and supplemental manufacturers who have indicated an interest and an ability to manufacture IMET’s initial four products.  We have received written cost quotations from these manufactures and production timetables, as well. The Company is in the process of evaluating the best venue to move forward.

 

The Company was hopeful that it was going to be able to secure its new website, marketing program, and product manufacturing schedules to begin marketing our products within six months of the closing of the Exchange. In reality, these details are taking more time to prepare and thus the Company is now targeting some initial product and marketing launches in 2017.

 

IMET License Agreement

 

IMET entered into a license with IMI, a Nevada limited liability company, on July 22, 2013 (the “License”).  In the License, IMI granted to IMET the exclusive licenses to use, produce, market and sell: (i) five marks (the “Licensed Marks”); (ii) four books written by Dr. Sasse (the “Licensed Content”); and (iii) approximately 150 supplements and foods created and previously sold by IMI (the “Licensed Articles”).  The Licensed Marks include the trademark “iMetabolic”; the domain name “www.imetabolic.com”; the trademark “iMetabolic Catalyst”; and a trademark and domain name related to Dr. Sasse.  The License had a term of three years, commencing on July 1, 2013 (the “Initial Term”), with a provision stating that the term of the License would automatically become perpetual if IMET sold $3.0 Million of Licensed Content or Licensed Articles before July 1, 2016. As a result of this date passing, an extension was executed until December 31, 2018. IMET is to bear all expenses of the creation and sale of the Licensed Content and Licensed Articles.  The License contains other provisions standard in licenses.

 

In conjunction with closing the Exchange, on March 16, 2015 IMI and IMET executed an amendment to the License (the “License Amendment”). In the License Amendment: (i) IMET returned to IMI all rights to the Licensed Content (Dr. Sasse’s books), the two Dr. Sasse Licensed Marks and all revenues from the sale of the Licensed Articles since July 1, 2013 through the date of closing the Exchange; (ii) the Initial Term was increased from three to four years; (iii) a provision was added stating that after the closing of the Exchange, IMI shall not sell any more of the Licensed Articles or any other products IMET deems as competing with the Licensed Articles; (iv) a provision was added stating that upon reaching the $3.0 Million milestone, IMI shall transfer and or assign to IMET the three remaining Licensed Marks; and (v) a provision was added stating that upon completion of the Initial Term, IMET shall have all rights, obligations, and burdens of enforcing the Licensed Marks.

 

During 2014, the trademark “iMetabolic” expired at the U.S. Patent and Trademark Office.  In conjunction with the closing of the Exchange, IMI re-applied for that trademark and the service mark "iMetabolic" on December 16, 2014.  In May 2015, we engaged Drinker, Biddle & Reath, LLP to correspond with the U.S. Patent and Trademark Office regarding our application.  As of April 19, 2016, the Company was awarded Registration Number 4,941,531 in the Class 5 Category. Additionally, on September 6, 2016, the Company was awarded Registration Number 5,034,186 in the Class 44 Category. At this juncture, the Company has succeeded in reclaiming both marks for consideration in its future operations.

 

 

RESULTS OF OPERATIONS

 

General and Administrative Expenses

 

For the three months ended March 31, 2017 and 2016, we recorded operating expenses of $6,637 and $22,966, respectively.  For nine months ended March 31, 2017 and 2016, we have recorded operating expenses $37,499 and $59,755, respectively. Both the three and nine month periods consist primarily of general and administrative expenses along with professional fees all of which are associated with maintaining the Company as a publicly traded entity.

 

Net Loss

 

For the three months ended March 31, 2017 and 2016, we recorded a net of $28,303 and $22,964, respectively. For the nine months ended March 31, 2017 and 2016, we recorded a net loss of $102,497 and $59,739, respectively.

 

Liquidity and Capital Resources 

 

    

On September 1, 2016, through unanimous approval by its Board, the Company opened a $65,000 escrow to initiate a proposed funding arrangement for future capital demands. This $65,000 escrow was funded by two private placements which have convertible notes associated with them (the “Notes”).  The Notes were convertible on March 1, 2017 at $0.0125 per share. These notes have since been extended at the same terms for an additional six months’ time moving the expiration to September 1, 2017.  If share conversion is not elected, then interest will be due on the Notes in the amount of $65,000. At December 31, 2016, the Company had a total of 5,200,000 shares reserved for issuance upon conversion of the Notes. $15,000 of the $65,000 private placement was funded by the Company’s President.

 

Over the next twelve months, we have estimated that in order to maintain reporting company status as defined under the Securities Exchange Act of 1934, as amended, we will require cash for general and administrative expenses and professional fees, which include accounting, legal and other professional fees, as well as filing fees. We believe we will be able to meet these costs through the use of existing cash and cash equivalents or additional amounts, as necessary, to be loaned by or invested in us by our stockholders, management or other investors. However, no assurance can be given that we will be able to raise additional capital, when needed or at all, or that such capital, if available, will be on acceptable terms. In the absence of obtaining additional financing, we may be unable to fund our operations. As a result, the Company’s independent registered public accounting firm has issued going concern opinion on the consolidated financial statements of the Company for the fiscal year ended June 30, 2016.

 

Off-Balance Sheet Arrangements

 

During the nine months ended March 31, 2017, we did not engage in any off-balance sheet arrangements set forth in Item 303(a) (4) of Regulation S-K. 

 

Critical Accounting Policies

 

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and judgments that significantly affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Note 1, “Business, Basis of Presentation and Significant Accounting Policies” in the Notes to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 filed with the Securities and Exchange Commission on October 13, 2016, describes our significant accounting policies which are reviewed by management on a regular basis. 

 

New Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

 

 

 

Our exposure to market risks is limited to changes in interest rates. We do not use derivative financial instruments as part of an overall strategy to manage market risk. We have no debt outstanding nor do we have any investment in debt instruments other than highly liquid short-term investments. Accordingly, we consider our interest rate risk exposure to be insignificant at this time.

 

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2017, our disclosure controls and procedures were not effective due to the size and nature of the existing business operation. Given the size of our current operation and existing personnel, the opportunity to implement internal control procedures that segregate accounting duties and responsibilities is limited. Until the organization can increase in size to warrant an increase in personnel, formal internal control procedure will not be implemented until they can be effectively executed and monitored. As a result of the size of the current organization, there will not be significant levels of supervision, review, independent directors nor formal audit committee.

 

Changes in Internal Control Over Financial Reporting

 

During the quarter ended March 31, 2017, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

As of the date of this report, the Company is not currently involved in any legal proceedings.

 

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. However, the risks associated with our Company are set forth in the "Risk Factors" section of our Form 8-K filed with the SEC on March 20, 2015.

 

 

None.

 

 

None.

 

 

Not applicable.

 

 

None.

 

 

 

The exhibits listed below are filed herewith.

 

___________________

 

 

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.