UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Exact name of registrant as specified in its charter)

Indicated 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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

State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  18,000,000 common shares as of October 20, 2015.

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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]

 

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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

These unaudited 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 August 31, 2015 are not necessarily indicative of the results that can be expected for the full year.

 

 

 

 

 

CLEARWATER VENTURES, INC.

BALANCE SHEETS

(UNAUDITED)

 

 

F-1

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CLEARWATER VENTURES, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

 

CLEARWATER VENTURES, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

CLEARWATER VENTURES, INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 -   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC").  In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein.

The Company has adopted a February 28 year end.

 (B) Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Significant intercompany accounts and transactions have been eliminated.

                           

F-4

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CLEARWATER VENTURES, INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

The Company owns the entire rights, title and interest in and to a unique pool filtration system, known as the "Pool Guardian".  With respect to this invention, the Company owns all technology, materials, and tools related to the development, support and maintenance of this product.  To date the Company is in the process of filing one provisional patent, however, the Company has no copyrights or trademark rights associated with this asset.  The asset was invented by a related party, and as such it has been recorded at the cost of the materials used to construct the prototype plus the cost of the patent.

Financial instruments consist of cash, accounts receivable, accounts payable, and notes payable. Recorded values of cash, receivables, payables and accrued liabilities approximate fair values due to the short maturities of such instruments.  Recorded values for notes payable and related liabilities approximate fair values, since their stated or imputed interest rates are commensurate with prevailing market rates for similar obligations.

The Company reports earnings (loss) per share in accordance with ASC Topic 260-10.  Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of August 31, 2015 and February 28, 2015, there were no potential common shares underlying warrants or options.

Revenue is recognized in accordance with Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements, as revised by SAB No. 104. As such, the Company recognizes revenue when persuasive evidence of an arrangement exists, title transfer has occurred, the price is fixed or readily determinable and collectability is probable. Sales are recorded net of sales discounts.

Revenues, which do not require production, modification or customization and do not have multiple elements, are recognized when (i) persuasive evidence of an arrangement exists; (ii) service has occurred; (iii) the Company's fee is fixed and determinable; and (iv) collectability is probable.

F-5

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CLEARWATER VENTURES, INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

On June 10, 2014, the Financial Accounting Standards Board ("FASB") issued update ASU 2014-10, Development Stage Entities (Topic 915).   Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP.  In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders' equity, (2) label the financial statements as those of a development stage entity;  (3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.  The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued.  The Company has elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information on the respective financial statements.

In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates (ASU) 2014-15 requiring an entity's management to evaluate whether there are conditions or events, considered in aggregate, that raise substantial doubt about entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

We do not believe there are any additional recently issued accounting standards that have not yet been adopted that will have a material impact on the Company's financial statements.

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 Company has a net loss of $14,370 for the six months ended August 31, 2015 and an accumulated deficit of $124,061 as of August 31, 2015, and it is expected that it will continue to have negative cash flows as the business plan is implemented.

These conditions give rise to doubt about the Company's ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to obtain additional financing or sale of its common stock as may be required and ultimately to attain profitability.

 

 

 

 

CLEARWATER VENTURES, INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

Fixed assets consist of the following:

 

Current liabilities consisted solely of amounts payable to professional service providers and interest on long-term loans.

On October 1, 2014 the Company entered into an uncollateralized promissory note with an outside source to obtain $10,000 for a term of 2 years at 6% annual interest.  The interest and principal are due in lump sum the sooner of (1) ninety days from written demand by Holder or (2) two years from the date of the note.  Accrued interest on this note is $550 as of August 31, 2015.

On December 9, 2014 the Company entered into a promissory note with an outside source to obtain $10,000 for a term of 2 years at 6% annual interest.  The interest and principal are due in lump sum the sooner of (1) ninety days from written demand by Holder or (2) two years from the date of the note.  Accrued interest on this note is $430 as of August 31, 2015.

On July 14, 2015 the Company entered into a promissory note with an outside source to obtain $2,500 for a term of 2 years at 6% annual interest.  The interest and principal are due in lump sum the sooner of (1) ninety days from written demand by Holder or (2) two years from the date of the note.  Accrued interest on this note is $19 as of August 31, 2015.

 

 

CLEARWATER VENTURES, INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

On February 24, 2014 a related party contributed a self-invented product, the "Pool Guardian", to the 100% owned subsidiary, Clearwater Nevada, LLC in exchange for 1,000 membership units in the LLC.

On February 25, 2014, the Company purchased all of the membership units (100% ownership) of Clearwater Nevada, LLC from a related party in exchange for 1,000,000 common shares of stock at par.  As of August 31, 2015 and February 28, 2015, this related party owned 89% and 100% (respectively) of the outstanding common shares, and is the CEO, and director of the Company.

The total number of shares of preferred stock the Company is authorized to issue is 10,000,000.  The stated par value is $0.001/share.

As of August 31, 2015 and February 28, 2015, no preferred shares are issued and outstanding.

Holders of common stock have voting rights equal to one vote for each share of Common Stock held and are entitled to receive dividends when, and if declared by the board of directors subject to the rights of any Preferred Stock having preference as to dividends. In the event of liquidation or dissolution, subject to the rights of Preferred Stock Holders' are entitled to share ratably in the Corporations assets. Holders of Common Stock do not have conversion, redemption or preemptive rights.

The total number of shares of common stock the Company is authorized to issue is 90,000,000. The stated par value is $0.001/share.

On February 25, 2014, the Company issued 1,000,000 common shares to a related party, in full payment for 100% ownership of the subsidiary, Clearwater Nevada, LLC.  The value of the subsidiary at that time was less than the par value ($0.001/share) of the issued stock; therefore the Company recognized a negative amount of additional paid in capital related to the transaction of $950.

On February 27, 2014 the Company issued 15,000,000 common shares to a related party for cash proceeds of $15,000 or $0.001per share.

One June 30, 2014 the Company issued 2,000,000 common shares for cash proceeds of $20,000 or $0.01per share.

 

 

 

 

CLEARWATER VENTURES, INC.

NOTES TO THE FINANCIAL STATEMENTS

(UNAUDITED)

Effective September 25, 2015, Zheng Huijun was appointed Chairman of the Company and Andy Zhao was appointed Chief Operating Officer of the Company.

On September 28, 2015, Clearwater Ventures, Inc. (the "Company") entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the "Agreement") with Tuston Brown, the Chief Executive Officer, sole Director and majority shareholder of the Company. The Agreement provides Mr. Brown with an option to purchase all of the membership interests of Clearwater Nevada, LLC, a Nevada limited liability company, a subsidiary of the Company, at such date as shall be further agreed upon in writing by the parties, or upon written notice given by Mr. Brown, at his sole option, on any date which is more than seventy-five (75) days from the date of the Agreement. The Agreement provides that Mr. Brown assumes all liabilities of the subsidiary following such assignment.

On September 28, 2015 (the "Closing Date"), Tuston Brown, the Chief Executive Officer, sole Director and majority shareholder of the Company sold an aggregate of 13,987,000 shares of restricted common stock of the Company to Zheng Huijun. Mr. Brown also sold an aggregate of 2,013,000 shares of restricted common stock to several purchasers, none of whom are currently affiliates of the Company, nor would be deemed affiliates as a result of the purchase of such shares. As a result of the transaction described above, Mr. Brown has completely divested of his ownership of common stock of the Company. Mr. Brown remains, however, a director and officer of the Company.

F-9

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

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.

Management's Discussion and Analysis of Financial Condition and Results of Operations

We were incorporated as Clearwater Ventures, Inc. on February 4, 2014 in the State of Nevada for the purpose of designing and marketing a new pool filter product known as the Pool Guardian. Our business is operated through our wholly-owned operating subsidiary, Clearwater Nevada, LLC. The Pool Guardian is designed to supplement and assist pool filters by capturing and holding unwanted pool surface debris. It functions by creating a mild rotation of the pool water, and collects any particulates from the surface into an easily managed screen container. We have completed our initial designs and have built a functioning prototype.

 

The Pool Guardian

The Pool Guardian is a pool filter assistant designed to capture and hold unwanted common pool debris. It functions by creating a mild rotation of the pool water, and collects any particulates from the surface into an easily managed screen container. The product is installed as an adapter that connects to the existing pool filter. It diverts a portion of the return water from the pool pump to a floating arm on the surface. This arm has surface ports along the outer edge that produce jets of water, creating a mild whirlpool effect. This rotation of water, combined with the specific shape of the arm, will cause any object on the surface to collect on the inner edge of the arm. A screen basket attached to the inner side of the arm below the surface will collect and hold all of the unwanted debris. The basket flips up to remove all of the debris from the pool.

 

 

The Pool Guardian is primarily constructed from 2" PVC tubing. It is approximately 6 feet long and has a 45 degree angle occurring 2 feet from the terminus. It connects to the pool pump using standard flexible pool tubing and a standard three way valve. The valve allows for the selection of arm function to off, on, or mixed. Off will divert all water from the pump to the existing pool output. On will provide all pump output to the arm. Mixed will provide water to both the existing pool pump output and the arm. The shape of the arm will allow it to rest on the wall of the pool and will adjust to the water level. It employs an external torsion control shape to maintain proper pool position. Design variations will allow it to maintain position without resting on the pool side. The device is designed to float on the surface and will operate in low water levels, and will not impede the function of the pool filter pump.

 

The PVC tubing and valves required for the construction of the Pool Guardian are commonly available materials used in the construction and plumbing industries and are widely available at home improvement and construction supply stores. For the construction of additional prototypes for testing and marketing purposes, and until we are able to engage a contract manufacturer, we intend to purchase these materials from local retailers.

 

 

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The Pool Guardian is designed to dramatically improve the cleanliness of above ground pools. It will eliminate the tedious task of screening the pool of debris. Leaves, tree needles and dead bugs tend to first collect on the surface, become water logged, and sink. The result is unwanted debris collecting mostly on the surface and bottom of the pool. This requires labor intensive screening activity and difficult vacuuming of the pool floor. Using the Pool Guardian, these unwanted items are collected within minutes of contacting the pool surface and never have the opportunity to become a nuisance. The chore of cleaning the pool is reduced to merely lifting up the Guardian and removing it from the pool.

 

Significant Equipment

 

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

Results of Operations for the three months ended August 31, 2015 and 2014.

We have not earned any revenues since the inception of our current business operations.  We incurred expenses and a net loss in the amount of $3,355 and $3,674, respectively for the three months ended August 31, 2015. Our expenses during the quarter consisted of professional fees of $3,195, administrative fees of $116, and depreciation expense of $44.  By comparison, we incurred expenses and a net loss in the amount of $20,093 for the three months ended August 31, 2014. Our expenses during the quarter period in 2014 consisted of professional fees of $19,639, administrative fees of $86, research and development expenses of $324, and depreciation expense of $44. Our expenses and our net loss were lower for the three months ended August 31, 2015 as compared to the same quarter last year primarily due to lower professional fees.  During 2014 we incurred higher one-time expenses for legal and accounting in connection with our public offering.

Results of Operations for the six months ended August 31, 2015 and 2014.

We incurred expenses and a net loss in the amount of $13,751 and $14,370, respectively, for the six months ended August 31, 2015. Our expenses during the six month period consisted of professional fees of $13,459, administrative fees of $204, and depreciation expense of $88.  By comparison, we incurred expenses and a net loss in the amount of $38,089 for the six months ended August 31, 2014. Our expenses during the period consisted of professional fees of $37,205, administrative fees of $195, research and development expenses of $615,, and depreciation expense of $74. Our expenses and our net loss were lower for the six months ended August 31, 2015 as compared to the same period last year primarily due to lower professional fees.  During 2014 we incurred higher one-time expenses for legal and accounting in connection with our public offering.

We anticipate our operating expenses will increase as we continue with our plan of operations and continue to develop our Pool Guardian product.

Liquidity and Capital Resources

As of August 31, 2015, we had current assets in the amount of $2,609, consisting entirely of cash. Our current liabilities as of August 31, 2015 were $73,424. Thus, we had a working capital deficit of $70,815 as of August 31, 2015.

Over the past year, our mix of total financing has shifted from only equity during our first several months of operations toward some debt financing used to meet our short term needs more recently. Our ability to continue our product development and move forward with our business plans will be contingent upon us obtaining additional financing and/or upon realizing sales revenue sufficient to fund our ongoing expenses. Until we are able to sustain our ongoing operations through sales revenue, we intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

 

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Going Concern

As discussed in the notes to our financial statements, we have no established source of revenue.  This has raised substantial doubt for our auditors about our ability to continue as a going concern.  Without realization of additional capital, it would be unlikely for us to continue as a going concern.

Our activities to date have been supported by financing.  Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan. 

Off Balance Sheet Arrangements

As of August 31, 2015, there were no off balance sheet arrangements.

Critical Accounting Policies

Except as set forth below, we do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow:

 

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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 August 31, 2015.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Mr. Tuston Brown.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2015, our disclosure controls and procedures are not effective.  There have been no changes in our internal controls over financial reporting during the quarter ended August 31, 2015.

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.

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, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Item 1. Legal Proceedings

Item 1A: Risk Factors

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

 

 

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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.