Notes to Financial Statements
June 30, 2014
(Unaudited)
NOTE 1.
BUSINESS DESCRIPTION AND NATURE OF OPERATIONS
Organization
Ibex Advanced Mortgage Technology, formerly Top To Bottom Pressure Washing, Inc., was formed as a Limited Liability Company effective on May 26, 2006 under the Laws of the State of Florida. On June 1, 2012 the Company was converted into a Florida Profit Corporation, and on June 25, 2014, the Company changed its name to Ibex Advanced Mortgage Technology to reflect the change in business direction.
We intend to operate a financial services platform that will interface with mortgage brokers to create financial efficiencies and generate substantial profits while remaining independent of extraneous market forces that could affect the profitability of our business. Once we acquire a mortgage bank, we will use the proprietary software developed by our President and Chairman William Coleman, for quick and accurate mortgage loan approvals.
The Company is headquartered in Sarasota, Florida. The elected year end is December 31.
NOTE 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Use of Estimates
The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information regarding the Companys significant accounting policies, refer to the audited consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on March 31, 2014.
In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of (a) the result of operations for the three and six months ended June 30, 2014 and 2013; (b) the financial position at June 30, 2014; and (c) cash flows for the six months ended June 30, 2014 and 2013, have been made. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates
Our financial statements may not be comparable to companies that comply with public company effective dates. Due to our election not to opt out of the extended transition period that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.
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. The Companys discontinued pressure washing operations had minimal sales for the first fiscal quarter and a net loss of ($33,196) for the six months ended June 30, 2014, compared to the net loss of ($10,110) for the six months ended June 30, 2013.
The Company changed its corporate strategy and direction during the quarter ended June 30, 2014, however, the Companys continuation is still a going concern and is dependent upon its ability to obtain clients and investment capital to fund at the new strategy and plan of operations. No assurance can be given that the Company will be successful in these efforts.
Cash and Cash Equivalents
The majority of cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The Company considers all highly liquid investments purchased with an original maturity of six months or less to be cash
-6-
Quick Link to
Table of Contents
equivalents.
Impairment of Long-lived Assets
The Company records long-lived assets at cost. Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Revenue Recognition
The Company recognizes revenue when it is realized or realizable and estimable in accordance with ASC 605, Revenue Recognition.
The Company recognizes a sale when the service has been completed at which time the risk of loss has passed to the customer, collection of the resulting receivable is reasonably assured, persuasive evidence of an arrangement exists, and the fee is fixed or determinable. If we determine that the fee is not fixed or determinable, we recognize revenue to the extent of which substantial work has been performed, at which time the fee becomes due, provided that all other revenue recognition criteria have been met. Also, sales arrangements may have contained customer-specific acceptance requirements for both products and services. In such cases, revenue was deferred at the time of delivery of the product or service and was recognized upon receipt of customer acceptance.
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.
Income Taxes
The Company has adopted the provisions of ASC 740-10,
Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of June 30, 2014, tax years 2013, 2012 and 2011 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.
The Company has adopted ASC 740-10,
Definition of Settlement in FASB Interpretation No. 48, (ASC 740-10), which was issued on May 2, 2007. ASC 740-10 amends FIN 48 to provide guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The term effectively settled replaces the term ultimately settled when used to describe recognition, and the terms settlement or settled replace the terms ultimate settlement or ultimately settled when used to describe measurement of a tax position under ASC 740-10. ASC 740-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of
-7-
Quick Link to
Table of Contents
limitations remains open. The adoption of ASC 740-10 did not have an impact on the accompanying consolidated financial statements.
Fair Value of Financial Instruments
FASB ASC Fair Value Measurements and Disclosures defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This ASC also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy are described below:
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable data by correlation or other means.
Level 3
Inputs that are both significant to the fair value measurement and unobservable.
Net Earnings (Loss) Per Share
In accordance with ASC 260-10, Earnings Per Share, basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period.
Recent Accounting Pronouncements
The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to June 30, 2014 through the date these financial statements were issued.
NOTE 3.
ACCOUNTS RECEIVABLE
Accounts receivable represent amounts due from customers in the ordinary course of business. The Company considers accounts more than 90 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. The Company generally does not require collateral for its accounts receivable. The Company considers all accounts receivable to be collectable and consequently has provided no allowance for doubtful accounts.
NOTE 4.
PROPERTY AND EQUIPMENT
The Company disposed of the pressure washing property and equipment to an interested Shareholder during the three months ended June 30, 2014. The disposed property consisted of equipment purchased for the production of revenues. Assets are depreciated over their useful lives when placed in service. Property and equipment at June 30, 2014 and December 31, 2013 were as follows:
-8-
Quick Link to
Table of Contents
|
|
|
|
|
|
|
|
June 30, 2014
(unaudited)
|
|
|
December 31, 2013
(audited)
|
Vehicles
|
$
|
0
|
|
$
|
17,936
|
Less accumulated depreciation
|
$
|
0
|
|
$
|
(16,418)
|
Property and Equipment, net
|
$
|
0
|
|
$
|
1,518
|
Assets are depreciated over their useful lives when placed in service. A total of $0 and $294 of depreciation were expensed during the six months ended June 30, 2014 and 2013, respectively.
The Companys obligation on its only leased equipment (a vehicle) was terminated in April 1, 2014 upon the sale of the Companys pressure washing assets.
NOTE 5.
RELATED PARTY TRANSACTIONS
In the first quarter, sole director Andy Z. Fan determined that the pressure washing assets, which were under performing, were not significant to the Company since the Company is considered a shell company, and therefore, the disposition of those assets would not be detrimental to the Company. Therefore, upon director and shareholder approval, on April 1, 2014, the Company disposed of the pressure washing assets to an interested Shareholder in exchange for the Shareholders surrender of his 500,000 shares of Company stock to the Company. The Shareholder also agreed to take over the lease payments on the leased vehicle. To compensate Director Fan for his efforts in disposing of the assets, Director Fan transferred the 500,000 shares received from the Shareholder to himself. The compensation was submitted to the Shareholders for a vote, and was approved.
The shareholders loan money to the Company as needed. All Shareholder loans were forgiven on May 5, 2014 as part of the share purchase agreement between then majority shareholder and an unrelated entity. On that same day, in exchange for the former majority shareholders forgiving his existing debt and transfer of 33,250,000 of his shares, the Company co-signed a convertible promissory note with the former majority shareholder for $236,000. The promissory note is payable in monthly installments beginning September 1, 2014, bears interest at an annual rate of 0.28%, and is convertible into company stock in the event of a default.
NOTE 6.
COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2014, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations, except as noted.
Leases And Facility
The Company leases office space in Sarasota, Florida on a month by month basis. The monthly rent is $300.
The Company leased a vehicle with a 39 month term. The monthly lease payment was $331. The vehicle lease was sold along with the pressure washing business in April, 2014.
Other Commitments
The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. There are no firm commitments as of June 30, 2014.
Employees
The Company does not have employment contracts with the officers of the Company.
Related Party
The controlling shareholders have pledged support to fund continuing operations, as necessary. From time to time, the Company is dependent upon the continued support of these parties, through temporary advances or through arrangements of their personal credit. However, there is no written commitment to this effect.
The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
NOTE 7.
STOCKHOLDERS EQUITY
-9-
Quick Link to
Table of Contents
On June 23, 2014, the Board of Directors proposed and Shareholders approved amending the Articles of Incorporation to decrease the total authorized capital stock of the corporation to Two Hundred Fifty Million (250,000,000) shares
There was no Common Stock issued during the six months ended June 30, 2014, however, effective June 23, 2014, a shareholder surrendered 29,500,000 of its shares to the Company for cancellation and they were returned to the Companys authorized and unissued capital.
On May 5, 2014, the Company issued a warrant to purchase 1,250,000 shares of common stock to the former majority Shareholder. The purchase price is $0.10 per Warrant Share but may be modified if the company issues options or other warrants at a lower price. The Warrant expires on May 5, 2015.
On June 17, 2014, the Company adopted a stock option plan and appointed Directors William Coleman and Diane J. Harrison to the Stock Option Committee of the Board of Directors. Thereafter, the Stock Option Committee convened a meeting of the Stock Option Committee. The Committee nominated and approved awarding Wesley Westmoreland, newly appointed director, 1,000,000 stock options with an option price of $0.01 per share.
At June 30, 2014, 6,400,000 shares of common stock were issued and outstanding.
NOTE 8.
INCOME TAX
The Companys 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 3.6%to income before taxes), as follows:
|
|
|
|
|
|
|
June 30, 2014
|
|
June 30, 2013
|
Tax Expense (Benefit) at the Statutory Rate
|
$
|
(6,100)
|
$
|
170
|
State Income Taxes, Net of Statutory Rate
|
$
|
(700)
|
$
|
20
|
Change in Valuation Allowance
|
$
|
6,800
|
$
|
(190)
|
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.
As of June 30, 2014 and December 31, 2013, the Company has net operating losses from operations. The carry forwards expire through the year 2023. The Companys 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 Companys net deferred tax asset as of June 30, 2014 and December 31, 2013 is as follows:
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
Deferred Tax Assets:
|
$
|
|
$
|
|
Net Operating Loss Carry Forward
|
$
|
32,900
|
$
|
27,100
|
Less: Valuation allowance
|
$
|
(32,900)
|
$
|
(27,100)
|
Total Deferred Tax Asset
|
$
|
-
|
$
|
-
|
NOTE 9.
DISCONTINUED OPERATIONS AND CHANGE IN DIRECTION
On April 1, 2014, the Company discontinued the pressure washing operations and disposed of the Company assets directly related to the pressure washing operations.
In the first quarter, sole director Andy Z. Fan determined that the pressure washing assets, which were under performing, were not significant to the Company, because the Company is considered a shell company, and therefore, the disposition of those assets would
-10-
Quick Link to
Table of Contents
not be detrimental to the Company. Therefore, upon director and shareholder approval, on April 1, 2014, the Company disposed of the pressure washing assets to an interested Shareholder in exchange for the Shareholders surrender of his 500,000 shares of Company stock to the Company. The Shareholder also agreed to take over the lease payments on the leased vehicle. To compensate Director Fan for his efforts in disposing of the assets, Director Fan approved the transfer of the 500,000 shares received from the Shareholder to himself. This compensation was submitted to the Shareholders for a vote and was approved.
Accordingly, the Board believed that to continue to protect and increase shareholder value, it would be to the advantage, welfare and best interests of the shareholders for the Company to consider alternative corporate strategies to generate new business revenue for the Company.
On May 5, 2014, then majority shareholder agreed to transfer 33,250,000 shares to an unrelated entity as part of a change in strategy for the Company. Upon completion of this transfer, the entity immediately surrendered 29,500,000 shares back to the company for cancelation and transferred the remaining 3,750,000 shares to individuals including the new officers and directors of the Company. On that same day, in exchange for the former majority shareholders forgiving the existing debt and transferring 33,250,000 of his shares, the Company co-signed a convertible promissory note with the former majority shareholder for $236,000. The promissory note is payable in monthly installments beginning September 1, 2014, bears interest at an annual rate of 0.28%, and is convertible into company stock in the event of a default. The Company also gave the former majority shareholder a warrant to purchase 1,250,000 shares of Company stock at $0.10 per share.
As of June 30, 2014, the Current Assets of and Liabilities of Discontinued Operations totaled $0.
Summary of results of discontinued operations is as follows:
Summary of Results of Discontinued Operations