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EX-31.1 - CERTIFICATION - Crown Alliance Capital Ltdkntc_ex311.htm
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EX-31.2 - CERTIFICATION - Crown Alliance Capital Ltdkntc_ex312.htm



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q/A

Amendment No. 1


[X]

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

 

For the quarterly period ended: September 30, 2011

 

 

[  ]

Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

 

 

 

For the transition period from __________ to__________

 

 

 

Commission File Number: 333-169346


Kinetic Resources Corp.

(Exact name of registrant as specified in its charter)


Nevada

27-2089124

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)


3601 Highway 7 East Suite # 203

Markham, ON L3R 0M3, Canada

(Address of principal executive offices)


(905) 604-8873

(Registrant’s telephone number)


___________________________

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


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 [X] Yes [  ] 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 [X] No


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


[   ] Large accelerated filer Accelerated filer

[   ] Non-accelerated filer

[X] Smaller reporting company

 


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


State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 3,261,000 as of November 10, 2011.




 






 

EXPLANATORY NOTE

This Amendment No.1 to the Quarterly Report on form 10-Q/A amends the Quarterly Report on Form 10-Q of Crown Alliance Capital Ltd. (the “Company”) for the quarter ended September 30, 2011, that was originally filed with the U.S. Securities and Exchange commission on November 14, 2011.  The purpose of the Amendment is to disclose the Company’s restated financial statements.  Upon completion of our March 31, 2012 financial statements, accounting errors were discovered that required the restatement of amounts previously reported. Additionally, it was determined that the sale of our subsidiary KRC Exploration LLC was accounted for incorrectly.  Under the terms of the Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the “Agreement”) (1), amounts included in accounts payable before the execution of the Agreement should have been assumed by our subsidiary.

(1)The agreement was filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 6, 2011.

 

 

 

 

 

 





 







TABLE OF CONTENTS

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

 

Item 1:  Financial Statements

3

Item 2:  Management’s Discussion and Analysis of Financial Condition and Results of Operations

5

Item 3:  Quantitative and Qualitative Disclosures About Market Risk

 6

Item 4:  Controls and Procedures

 6

 

 

PART II – OTHER INFORMATION

 

 

 

Item 1:  Legal Proceedings

 8

Item 1A:  Risk Factors

 8

Item 2:  Unregistered Sales of Equity Securities and Use of Proceeds

 8

Item 3:  Defaults Upon Senior Securities

 8

Item 4:  (Removed and Reserved)

 8

Item 5:  Other Information

 8

Item 6:  Exhibits

 8




















3






PART I - FINANCIAL INFORMATION


Item 1. Financial Statements


Our financial statements included in this Form 10-Q are as follows:


F-1         

Balance Sheets as of September 30, 2011 (unaudited) and June 30, 2011 (derived from audited financial information);

                       

 

F-2          

Statements of Operations for the three months ended September 30, 2011 and 2010, and from inception on March 4, 2010 through September 30, 2011 (unaudited);

 

 

F-3        Statement of Stockholders' Equity (Deficit) for the period from inception (March 4, 2010) to September 30, 2011
   

F-4        

Statements of Cash Flows for the three months ended September 30, 2011 and 2010, and from inception on March 4, 2010 through September 30, 2011 (unaudited);

 

 

F-5         

Notes to Financial Statements.


These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended September 30, 2011 are not necessarily indicative of the results that can be expected for the full year.















 

4
















KINETIC RESOURCES CORP.

(A Development Stage Company)

 

FINANCIAL STATEMENTS

September 30, 2011

(Stated in US Dollars)

(Unaudited)


 

 

 

 


 









5







KINETIC RESOURCES CORP.

(A Development Stage Company)

BALANCE SHEETS

(Stated in US Dollars)

(Unaudited)


 

September 30

June 30

 

2011

2011

 

(Unaudited)

(Audited)

ASSET

 

 

 

 

 

Current

 

 

   Cash

$  413

$  5,958

 

 

 

Total current assets

413

5,958

 

 

 

Total assets

$  413

$  5,958

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

Current

 

 

   Accounts payable

$  14,654

$  2,612

 

 

 

Total current liabilities

14,654

2,612

 

 

 

Long term liabilities

 

 

    Accrued interest

-

655

    Notes payable, related party - Note 4

-

50,000

 

 

 

Total long term liabilities

-

50,655

 

 

 

Total liabilities

14,654

53,267

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

Preferred stock, $0.001 par value

 

 

10,000,000 shares authorized, none outstanding

-

-

Common stock, $0.001 par value - Notes 4 and 8

 

 

90,000,000 shares authorized

 

 

3,550,000 shares issued and outstanding

3,550

3,550

Additional paid in capital

107,910

26,228

Deficit accumulated during the development stage

(125,701)

(75,798)

 

 

 

Total stockholders’ deficit

(14,241)

(47,309)

 

 

 

Total liabilities and stockholders’ deficit

$  413

$  5,958



SEE ACCOMPANYING NOTES.



F-1







KINETIC RESOURCES CORP.

(A Development Stage Company)

INTERIM STATEMENTS OF OPERATIONS

(Stated in US Dollars)

(Unaudited)



 

 

From

 

 

inception

 

 

(March 4 2010)

 

Three Months Ended

to

 

September 30,

September 30,

 

2011

2010

2011

 

 

 

 

Expenses

 

 

 

 

 

 

 

  Audit and accounting fees

$  7,608

$  7,360

$  24,978

  Bank charges

93

273

623

  Foreign exchange gain

2

(3)

(1)

  Legal fees

27,583

4,143

65,993

  Management fees

-

-

500

  Mineral property option costs

4,000

4,000

8,000

  Mineral property exploration costs

-

2,500

2,500

  Office expenses

1,000

1,600

7,606

  Rent

5,189

-

5,189

  Transfer and filing fees

3,830

94

8384

 

 

 

 

Operating loss

(49,305)

(19,967)

(123,772)

 

 

 

 

  Interest expense - Note 4

(598)

-

(1,929)

 

(598)

-

(1,929)

 

 

 

 

Net loss

$  (49,903)

$  (19,967)

$  (125,701)

 

 

 

 

 

 

 

 

Basic loss per share

$  (0.01)

$  (0.01)

 

 

 

 

 

Weighted average number of shares outstanding - basic

3,550,000

3,550,000

 



 

SEE ACCOMPANYING NOTES.



F-2






KINETIC RESOURCES CORP

(A Development Stage Company)

STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)

for the period from inception (March 4, 2010) to September 30, 2011

(Stated in US Dollars)

(Unaudited)


 

 

 

 

 

 

Deficit

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Additional

During the

 

 

 

(Note 6)

Paid In

Development

 

 

Preferred Shares

Common Shares

Capital

Stage

Total

 

Number

Amount

Number

Amount

 

 

 

Balance, inception (March 4, 2010)

-

$ -

-

$ -

$ -

$ -

$ -

 

 

 

 

 

 

 

 

Capital stock issued to founder for cash:

-

-

2,000,000

2,000

13,558

-

15,558

Capital stock issued for cash, net of commission

-

-

1,550,000

1,550

10,705

-

12,255

Net loss for the period

-

-

-

-

-

(7,077)

(7,077)

 

 

 

 

 

 

 

 

Balance, June 30, 2010

-

-

3,550,000

3,550

24,263

(7,077)

20,736

 

 

 

 

 

 

 

 

Capital contribution by president - Note 6

-

-

-

-

676

-

676

Net loss for the period

-

-

-

-

-

(68,721)

(68,721)

 

 

 

 

 

 

 

 

Balance, June 30, 2011

-

-

3,550,000

3,550

24,939

(75,798)

(47,309)

 

 

 

 

 

 

 

 

Capital contribution - Sale of subsidiary- Note 4

 

 

 

 

82,745

 

61,027

Capital contribution by president - Note 6

-

-

-

-

226

-

226

Net loss for the period

-

-

-

-

-

(49,903)

(49,903)

 

 

 

 

 

 

 

 

Balance, September 30, 2011

-

-

3,550,000

$ 3,550

$ 107,910

$ (125,701)

$ (14,241)




 

SEE ACCOMPANYING NOTES.



F-3







 

KINETIC RESOURCES CORP.

(A Development Stage Company)

INTERIM STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

(Unaudited)


 

 

 

From

 

 

 

inception

 

 

 

(March 4 2010)

 

Three Months Ended

to

 

September 30,

September 30,

 

2011

2010

2011

 

 

 

 

Cash Flows Used in Operating Activities

 

 

 

  Net loss

$  (49,903)

$  (19,967)

$  (125,701)

 

 

 

 

Adjustments to reconcile net loss to net cash used by operating activities:

 

 

 

  Non cash interest expense - capital contribution

226

-

902

 

 

 

 

  Changes in operating assets and liabilities:

 

 

 

  Accrued interest

372

-

1,027

  Accounts payable and accrued liabilities

33,760

1,068

36,372

 

 

 

 

Net cash used in operating activities

(15,545)

(18,899)

(87,400)

 

 

 

 

Cash Flows from Financing Activities

 

 

 

  Proceeds from capital stock issued

-

-

27,813

  Due to related party

-

(500)

-

  Proceeds from notes payable, related party

10,000

15,000

60,000

 

 

 

 

Net cash provided by financing activities

10,000

14,500

87,813

 

 

 

 

Increase (decrease) in cash during the period

(5,545)

(4,399)

413

 

 

 

 

Cash, beginning of the period

5,958

27,841

-

 

 

 

 

Cash, end of the period

$  413

$  23,442

$  413

 

 

 

 

Supplemental information

 

 

 

 

 

 

 

Interest and taxes paid in cash

$  -

$  -

$  -

 

 

 

 

Non-cash activities

 

 

 

Accounts payable assumed with sale of subsidiary

$  21,718

$  -

$  21,718

Accounts payable and accrued interest, related party assumed with sale of subsidiary

$  61,027

$  -

$  61,027


 

SEE ACCOMPANYING NOTES.




F-4




KINETIC RESOURCES CORP.

(A Development Stage Company)

NOTES TO THE INTERIM FINANCIAL STATEMENTS

September 30, 2011

(Stated in US Dollars)

(Unaudited)


Note 1

Basis of Presentation


While the information presented in the accompanying September 30, 2011 interim financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with the accounting principles generally accepted in the United States of America.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  These interim consolidated financial statements should be read in conjunction with the Company’s June 30, 2011 audited financial statements (notes thereto) included in the Company’s Annual Report on Form 10-K.


Operating results for the three months ended September 30, 2011 are not necessarily indicative of the results that can be expected for the year ending June 30, 2012.


Restatement

Upon completion of the Companys March 31, 2012 financial statements, accounting errors were discovered that required the restatement of amounts previously reported. Additionally, it was determined that the sale of our subsidiary KRC Exploration LLC was accounted for incorrectly.  Under the terms of the Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the Agreement), amounts included in accounts payable before the execution of the Agreement should have been assumed by the Companys subsidiary.

The following is a summary of the impact of these restatements on the Companys Balance Sheets at September 30, 2011:

 

 

  

September 30, 2011

 

  

As PreviouslyReported

  

ErrorCorrection

 

 

 

 

 

As Restated

Accounts payable

 

$

36,372

 

$

(21,718)

 

 

(a)

 

 

$

14,654

Total current liabilities

  

$

36,372

  

$

(21,718)


 

(a)


 

$

14,654

Additional paid in capital

  

$

86,192


$

21,718


 

(a)


 

$

107,910

Total stockholders equity (deficit)

  

$

(35,959)

  

$

21,718


 

(a)


 

$

(14,241)


 

(a)

To correct certain errors discovered upon completion of the Companys March 31, 2012 financial statements, primarily consisting of adjustment to properly recognize the assumption of liabilities by the Companys former subsidiary.


The following is a summary of the impact of these restatements on the Companys Statements of Stockholders Equity (Deficit) for the period ended September 31, 2011:

 

 

  

As PreviouslyReported

 

 

ErrorCorrection

 

 

 

 

 

As Restated

 

Capital contribution- Sale of subsidiary


$

61,027

 

 

$

21,718


 

(a

)

 

$

82,7458

 

Balance September 30, 2011 - Additional paid in capital

  

$

86,192

 

 

$

21,718



(a

)

 

$

107,910


 

(a)

To correct certain errors discovered upon completion of the Companys March 31, 2012 financial statements, primarily consisting of adjustment to properly recognize the assumption of liabilities by the Companys former subsidiary.



 

F-5








Note 2

Nature of Operations and Ability to Continue as a Going Concern


The Company was incorporated in the state of Nevada, United States of America on March 4, 2010.  The Company is an exploration stage company and was formed for the purpose of acquiring exploration and development stage mineral properties.  The Company’s year-end is June 30.


On June 4, 2010, the Company incorporated a wholly-owned subsidiary, KRC Exploration LLC (“KRC”) in the State of Nevada, United States of America (“USA”) for the purpose of mineral exploration in the USA.


On August 31, 2011, the Company changed its business focus to the development of a portfolio of life settlement policies and sold KRC to the former president.

 

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.  The Company has yet to achieve profitable operations, has accumulated losses of $125,701 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due.

 

Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.


Note 3

Summary of Significant Accounting Policies


The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and are stated in US dollars.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which may have been made using careful judgment. Actual results may vary from these estimates.


The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:


Principles of Consolidation


These financial statements include the accounts of the Company and KRC until KRC was disposed of by sale to the former president on August 31, 2011.  Accordingly, the statements of operations and cash flows presented include the results of KRC from June 4, 2010 to August 31, 2011 and the balance sheet presented at June 30, 2011 is a consolidated balance sheet.  The balance sheet presented at September 30, 2011 is solely that of Kinetic Resources Corp.  All significant inter-company transactions and balances have been eliminated.


Development Stage Company


From inception through August 31, 2011, the Company was an exploration stage company.  On August 31, 2011, the Company changed business directions from acquiring exploration and development stage mineral properties to development of a portfolio of life settlement policies.  The Company is now a development stage company.  All losses accumulated since inception have been considered as part of the Company’s development stage activities.

F-6







Note 3

Summary of Significant Accounting Policies - (cont’d)

 

Cash and cash equivalents


The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.  There were no cash equivalents held at September 30, 2011 or June 30, 2011.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At September 30, 2011 and June 30, 2011, the balance did not exceed the federally insured limit.


Foreign Currency Translation


The Company’s functional currency is the United States dollar as substantially all of the Company’s operations are in the USA. The Company uses the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (“SEC”).


Assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date and capital accounts are translated at historical rates.  Income statement accounts are translated at the average rates of exchange prevailing during the period.  Translation adjustments from the use of different exchange rates from period to period are included in the Accumulated Other Comprehensive Income account in Stockholder’s Equity, if applicable.  Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date.  Any exchange gains and losses are included in the Statement of Operations.


Earnings per share  


In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,”  basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.


Income Taxes


The Company uses the asset and liability method of accounting for income taxes.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases.  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.



F-7







Note 3

Summary of Significant Accounting Policies - (cont’d)


Income Taxes - (cont’d)


The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.


Stock-based Compensation


The Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of the adoption.

 

 

Newly adopted accounting policies


The Company will adopt FASB ASC Topic 325-30 “Investments in Insurance Contracts”. As of September 30, 2011, the Company has not determined how it will account for life settlement contracts.

 

 

Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation.  These reclassifications had no effect on previously reported results of operations or retained earnings.  The Company reclassified common stock from the balance sheet to additional paid in capital pursuant to the cancellation of capital shares on November 11, 2011.


 

Note 4

Sale of Subsidiary


On August 31, 2011, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the “Agreement”), with the former President of the Company.  Pursuant to the Agreement, the Company’s interest in KRC was transferred to the former President and the former president assumed all interests and liabilities of KRC amounting to $61,027 in exchange for the Company’s interest in KRC.


The following table summarizes the identifiable assets and liabilities of KRC that were disposed of, the consideration received, and the loss of KRC for the period from July 1, 2011 to August 31, 2011.

 

August 31, 2011

Identifiable Assets and Liabilities

 

Amount owed to Kinetic Resources Corp

$  (13,220)

Net liabilities of KRC

(13,220)

 

 

Consideration Received

 

Settlement of promissory notes and accrued interest

61,027

   Assumption of Accounts payable

21,718

Elimination of consolidated losses of KRC

13,220

 

95,965

 

 

Sale of subsidiary- related party

$  82,745

 

 

Loss for the period from July 1, 2011 to August 31, 2011

 

 

 

Mineral property option costs

$  4,000


Subsequently, on November 11, 2011, the former President of the Company and several shareholders entered into a stock cancellation agreement with the Company whereby 824,000 and 465,000, common shares, respectively, were returned to treasury and cancelled (See Note 7 Subsequent Events).



F-8







Note 5

Financial Instruments


Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.


In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs.  The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.  Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:



Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.


Level 2 - inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.


The carrying value of the Company’s financial assets and liabilities which consist of cash, accounts payable and accrued liabilities in management’s opinion approximate their fair value due to the short maturity of such instruments.  These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1.  Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.


Note 6

Related Party Transactions - (Note 4)


On August 30, 2010, the Company issued a promissory note of $15,000 to the Company’s president and received $15,000 cash in exchange.  The note is unsecured, non-interest bearing and matures on September 30, 2012.  During the three month period ended September 30, 2011, the Company has recorded interest expense of $226 (three month period ended September 30, 2010 - $nil) and also recorded a capital contribution of $226 (2010 - $nil) in respect of the imputed interest charge on this note payable.



F-9







Note 6

Related Party Transactions - (Note -4) - (cont’d)


On February 11, 2011, the Company issued a promissory note of $25,000 to the Company’s president and received $25,000 cash in exchange. The promissory note is unsecured, bears interest at 6% per annum, and matures on February 28, 2013.  During the three month period ended September 30, 2011, the Company accrued $255 (three month period ended September 30, 2010 - $nil) of interest expense in respect of this note payable.


On May 10, 2011, the Company issued a promissory note of $10,000 to the Company’s president and received $10,000 cash in exchange. The promissory note is unsecured, bears interest at 6% per annum, and matures on May 31, 2013.  During the three month period ended September 30, 2011, the Company accrued $102 (three month period ended September 30, 2010 - $nil) of interest expense in respect of this note payable.


On August 22, 2011, the Company issued a promissory note of $10,000 to the Company’s president and received $10,000 cash in exchange. The promissory note is unsecured, bears interest at 6% per annum, and matures on August 31, 2013.  During the three month period ended September 30, 2011, the Company accrued $15 (three month period ended September 30, 2010 - $nil) of interest expense in respect of this note payable.  


On August 31, 2011, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the “Agreement”), with the former President of the Company.  Pursuant to the agreement, the former President of the Company assumed $61,027 of related party notes payable and accrued interest. (Note 4)


Note 7

Subsequent Event


On October 3, 2011, the Company issued 1,000,000 common shares to pursuant to a share subscription agreement at $0.045 per share for total proceeds of $45,000.

 

On November 11, 2011, the former President of the Company and several shareholders entered into a stock cancellation agreement with the Company whereby 824,000 and 465,000, common shares, respectively, were returned to treasury and cancelled.  Due to the fact that the shares under this agreement have been cancelled without the exchange of consideration to reduce the number of shares outstanding, the Company considered the change in capital structure from the cancellation agreement a reverse stock split.  In accordance with SAB Topic 4-C, the Company recorded the cancellation retrospectively as a reduction to the par value of common stock with a corresponding increase to additional paid-in capital.


Note 8

Commitment


On September 1, 2011, the Company entered into a lease agreement for a term of two years.  The Company’s commitment for annual minimum future lease payments under office rental agreements are as follows:


2012

$

23,828

2013

$

31,770

2014

$

5,295


Additional fees and taxes of approximately $2,541 per month are due in connection with the lease agreement.  Upon acceptance of the lease agreement, a security deposit of $12,000 was required.  As of September 30, 2011, a security deposit of $12,000 was unpaid.





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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


Forward-Looking Statements


Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.”   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  


Company Overview


We are a Nevada corporation formed March 4, 2010.  Our initial business operations were focused on the exploration of mineral properties in Washington.   On August 31, 2011, we entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the “Agreement”) with our former sole officer and director, Luis Antonio Delgado Gonzalez.  Pursuant to the Agreement, we transferred all membership interests in our operating subsidiary, KRC Exploration LLC, to Mr. Gonzalez.  In exchange for this assignment of membership interests, Mr. Gonzalez agreed to assume and cancel all liabilities relating to our former business of exploring approximately 80 acres of lode mining claims located in the State of Washington.    


As a result of the Agreement, we are no longer pursuing our former business plan and have changed our business focus.  As financing permits, we will be acquiring an ongoing portfolio of life settlement policies.  We expect that the universal and whole life policies we purchase will provide substantial payouts upon the passing of the insured.  With the right business model and experienced management, we believe we will be able to accumulate a portfolio of quality policies that will generate stable returns.  As our new line of business continues to develop, we will make appropriate additional disclosures.


Results of operations for the three and nine months ended September 30, 2011 and 2010, and for the period from March 4, 2010 (date of inception) through September 30, 2011


We have not earned any revenues from inception on March 4, 2010 through the period ending September 30, 2011. We are presently in the development stage of our business and we can provide no assurance that we will produce significant revenues or, if revenues are earned, that we will be profitable.



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We have incurred total expenses and net losses in the amount of $125,701 from our inception on March 4, 2010 through the period ending September 30, 2011.   Our expenses since our inception have consisted primarily of legal fees, audit and accounting fees, mineral property option costs, office expenses, transfer and filing fees and mineral property costs. During the three months ended September 30, 2011, we incurred expenses and net losses in the amount of $49,903 consisting primarily of audit and accounting fees, legal fees, and mineral property costs. During the three months ended September 30, 2010, we incurred expenses and net losses in the amount of $19,967.  


Liquidity and Capital Resources


As of September 30, 2011, we had current assets of $413, consisting entirely of cash.  As of September 30, 2011, we had current liabilities of $14,654, consisting of accounts payable.  Thus, we had a working capital deficit of $14,241 as of September 30, 2011.


We will require substantial additional funding in order to undertake our planned business of acquiring a portfolio of life settlement policies. Although we are currently seeking equity funding, we have no firm arrangements for financing and can provide no assurance that such funding will be received in an amount sufficient to pursue our planned line of business.


Off Balance Sheet Arrangements


As of September 30, 2011, there were no off balance sheet arrangements.  


Going Concern


We have yet to achieve profitable operations, have accumulated losses of $125,701 since our inception, and we have no established source of revenue, all of which casts substantial doubt about our ability to continue as a going concern.  


Item 3. Quantitative and Qualitative Disclosures About Market Risk


A smaller reporting company is not required to provide the information required by this Item.


Item 4. Controls and Procedures


We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2011.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, Lorraine Fusco.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2011, our disclosure controls and procedures were not effective.  There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2011.




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Management determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation and control procedures not regularly performed due to the lack of staff and resources.


Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.


Limitations on the Effectiveness of Internal Controls


Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error.   Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.











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PART II – OTHER INFORMATION


Item 1. Legal Proceedings


We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.


Item 1A: Risk Factors


A smaller reporting company is not required to provide the information required by this Item.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


None


Item 3. Defaults upon Senior Securities


None


Item 4. Removed and Reserved


Item 5. Other Information


None


Item 6. Exhibits


Exhibit Number

Description of Exhibit

31.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002








9






SIGNATURES


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


 

Kinetic Resources, Corp.

 

 

Date:

June 25, 2012

 

 

 

/s/ Lorraine Fusco

By:

Lorraine Fusco

Title:

Chief Executive Officer and Director
























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