UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

  

 

For the quarterly period ended February 29, 2016

 

 

For the transition period from _________ to __________

 

Commission file number: 333-178210

 

 

 

  

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.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  ☒    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.  See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  

 

 

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

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of  April 18,  2016:  37,521,511 common shares and 100,000 shares of preferred stock.

 

 

 

PART I — FINANCIAL INFORMATION

  

Item 1. Financial Statements.

 

 

TABLE OF CONTENTS

 

 

 

 

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

 

 

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

 

 

SERVICE TEAM, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT February 29, 2016 (UNAUDITED)

 

 

 

Service Team Inc. (the "Company") was incorporated pursuant to the laws of the State of Nevada on June 6, 2011.  The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States.  The business proved to be unprofitable and the Company reduced its warranty and repair operations.  On June 5, 2013, Service Team Inc. acquired Trade Leasing, Inc. for 4,000,000 shares of its common stock, a commonly held company.  Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013.  Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies.  

 

The Company has established a fiscal year end of August 31.

 

 

 

The consolidated financial statements presented in this report are the combined financial reports of Trade Leasing, Inc. and Service Team Inc. 

 

The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).

 

The consolidated financial statements present the Balance Sheet, Statements of Operations, Shareholders' Deficit and Cash Flows of the Company. These consolidated financial statements are presented in United States dollars. The accompanying audited, consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q.  All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.

 

 

The accompanying consolidated financial statements include the accounts of Service Team Inc. and Trade Leasing, Inc. both of which are under common control and ownership. The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. 

 

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.  Actual results could differ from those estimates. 

  

 

 

 

Cash and equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at February 29, 2016, or August 31, 2015.

 

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.

 

 

All accounts receivable are due thirty (30) days from the date billed. If the funds are not received within thirty (30) days the customer is contacted to arrange payment. The Company uses the allowance method to account for uncollectable accounts receivable. All accounts were considered collectable at period end and no allowance for bad debts was considered necessary.

 

The Company's wholly owned subsidiary, Trade Leasing, Inc., has more than 400 customers. Three customers represented about 23%, 11% and 10% of total receivables as of February 29, 2016.  One customer represented about 20% of total receivables as of August 31, 2015. During the six month period ended February 29, 2016, the Company had one customer that represented 14% of total sales.  During the six month period ended  February 28, 2015, the Company had one customer that represented about 22% of total sales. 

 

 

The Company does not own inventory, materials are purchased as needed from local suppliers; therefore, there was no additional inventory on hand at February 29, 2016 or August 31, 2015. 

 

 

 

 

 

Equipment, vehicles and furniture, which are recorded at cost, consist primarily of fabrication equipment and are depreciated using the straight-line method over the estimated useful lives of the related assets (generally 15 years or less). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives. There was $3,042 and $994 of depreciation expense during the six  months ended February 29, 2016 and 2015, respectively. 

Net property and equipment were as follows at February 29, 2016 and August 31, 2015: 

 

 

 

Service Team Inc., effective September 1, 2015, leased new facilities at 1818 Rosslynn Avenue, Fullerton, California, to manufacture its products.  The Company has moved from 10633 Ruchti Road, South Gate, California, effective October 1, 2015.  The new facility is leased for six and one half years at a price of $10,000 per month, for the first six months; and, $14,000 per month thereafter.  Service Team Inc pays for the fire insurance and property taxes on the building estimated to be approximately $2,000 per month. The location consists of  three acres of land and one building of approximately 30,000 square feet.   The facility is approximately one-third larger than the prior facility in South Gate. 

Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Hallmark Venture Group, Inc., a related party, at no charge.

 

 

From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.

 

 

The Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 on June 6, 2011. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has various financial instruments that must be measured under the new fair value standard including: cash, convertible notes payable, accrued expenses, promissory notes payable, accounts receivable and accounts payable. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:   

 

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.  The fair value of the Company's cash is based on quoted prices and therefore classified as Level 1. 

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

Cash, accounts receivable, accounts payable, promissory notes, convertible notes and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.

 

The following table presents assets and liabilities that were measured and recognized at fair value as of February 29, 2016 on a recurring basis:

 

 

The following table presents assets and liabilities that were measured and recognized at fair value as of August 31, 2015 on a recurring basis:

 

 

 

 

 

Trade Leasing Division

 

The Trade Leasing Division receives orders from customers to build or repair truck bodies. The company builds the requested product. At the completion of the product the truck is delivered to the customer.  If the customer accepts the product Trade Leasing Inc. issues an invoice to the customer for the job. The invoice is entered into our accounting system and is recognized as revenue at that time.

 

In the Trade Leasing Division we use the completed contract method for truck bodies built, which typically have construction periods of 15 days or less. Contracts are considered complete when title has passed, the customer has accepted the product and we do not retain risks or rewards of ownership of the truck bodies. Losses are accrued if manufacturing costs are expected to exceed manufacturing contract revenue.  Manufacturing expenses are primarily composed of aluminum cost, which is the largest component of our raw materials cost and the cost of labor. 

 

Service Products Division

 

The Service Products Division shut down in fiscal 2013 repaired or replaced electrical appliances (mostly televisions), covered by warranties or insurance companies.  The Company had a price list of its services that sets forth a menu of charges for various repairs or replacements.  At the completion of the repair, an invoice was prepared itemizing the parts used and fixed labor rate costs billed by the Company.  The invoice was entered into our accounting system and recognized as revenue at that time. Our invoice was paid by the warranty insurance companies.  We did not take title to the product at any point during this process.

 

As described above, in accordance with the requirements of ASC 605-10-599, the Company recognized revenue when (1) persuasive evidence of an arrangement exists (contracts); (2) delivery has occurred; (3) the seller's price is fixed or determinable (per the customer's contract); and (4) collectability is reasonably assured (based upon our credit policy).

 

 

The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

 

In December of 2004, the FASB issued a standard which applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are based on the fair value of those equity instruments. For any unvested portion of previously issued and outstanding awards, compensation expense is required to be recorded based on the previously disclosed methodology and amounts. Prior periods presented are not required to be restated. We adopted the standard as of inception.  The Company has not issued any stock options to its Board of Directors and officers as compensation for their services.  If options are granted, they will be accounted for at a fair value as required by the FASB ASC 718.

  

 

 

 

The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share ("Basic EPS") is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share ("Diluted EPS") are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised.  During the three and six month periods ended February 29, 2016 and February 28, 2015, because the Company operations resulted in net losses, no additional   dilutive securities were included in the , Diluted EPS as that would be anti-dilutive to the resulting diluted earnings per share.

In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.

In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations.
 

 

The Company's authorized capital is 74,000,000 common shares with a par value of $0.001 per share and 100,000 preferred shares with a par value of $0.001 per share.  On December 2,2015 the company increased its authorized capital stock to 500,000,000 common shares.

During September 2015, Tangers Investment Group LLC was issued 1,990,950 shares as payment for the $22,000 of subscriptions payable accrued at August 31, 2015.

On November 25, 2015, Tangers Investment Group LLC converted $8,095 of its Note in the amount of into 1,541,401 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

 

 

On January 11, 2016, Tangers Investment Group LLC converted $6,190 of its Note in the amount of into 1,695,890 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 3, 2016, Tangers Investment Group LLC converted $2,876 of its Note in the amount of into 2,054,286 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 10, 2016, Tangers Investment Group LLC converted $3,450 of its Note in the amount of into 2,464,286 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On January 19, 2016, Vis Vires Group converted $2,365 of its Note in the amount of into 1,341,250 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 1, 2016, Vis Vires Group converted $2,745 of its Note in the amount of into 1,098,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 8, 2016, Vis Vires Group converted $4,695 of its Note in the amount of into 2,471,053 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 18, 2016, Vis Vires Group converted $4,695 of its Note in the amount of into 2,471,053 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 26, 2016, Vis Vires Group converted $5,435 of its Note in the amount of into subscriptions payable of $5,435 as the shares were not issued prior to February 29, 2016. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

 

On February 1, 2016, LG Capital converted $2,470 of its Note in the amount of into 562,340 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 12, 2016, LG Capital converted $2,500 of its Note in the amount of into 379,750 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 29, 2016, LG Capital converted $2,485 of its Note in the amount of into 718,628 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 3, 2016, JMJ Financial converted $1,435 of its Note in the amount of into 1,025,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 10, 2016, JMJ Financial converted $1,728 of its Note in the amount of into 1,234,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 12, 2016, JMJ Financial converted $1,813 of its Note in the amount of into 1,295,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

On February 16, 2016, JMJ Financial converted $2,447 of its Note in the amount of into 1,748,000 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

As of February 29, 2016 the Company has not granted any stock options.  

 

Fiscal year ended August 31, 2015

On January 20, 2015, the Company authorized and issued 100,000 shares of Series A Preferred Stock to be granted to Hallmark Holdings Inc. (a related party) in exchange for services. The 100,000 shares grant the holder to have the right to vote on all shareholder matters equal to 500 votes per share. The Series A shares were valued according to the additional voting rights assigned. The value assigned to the voting rights was derived from a model utilizing control premiums to value the voting control of the preferred stock. The value assigned to the Series A shares was $499,000 and was recorded on the grant date as stock based compensation.  

On January 23, 2015, the Company filed a Certificate of Designation to establish the rights and benefits of Class A preferred stock.

During 2015, the company issued 40,000 shares in exchange for $4,000 from a third party investor.

On August 26, 2015, Tangers Investment Group LLC converted $10,000 of its Note in the amount of into 904,977 shares of common stock. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

During 2015, Tangers Investment Group LLC converted $22,000 of its Note into a stock payable. As the conversion was completed within the terms of the convertible note agreement, no gain or loss was recognized as a result of this conversion.

During the twelve months ended August 31, 2015, $683 of interest expense was imputed from a promissory note with related party Hallmark Venture Group, Inc. based upon the average balance during the period at an interest rate of 10 percent.

As of August 31, 2015 the Company has not granted any stock options.  

 

US Affiliated
 

 US Affiliated
 

 

 

 

 

On September 1, 2015, Service Team Inc leased an industrial building located on three acres of land at 1818 E. Rosslynn Avenue, Fullerton, California.  The lease rate is $10,000 per month for the first six months; then $14,000 per month for the remaining six years of the lease.  Service Team Inc is obligated to pay the fire insurance and property taxes on the building that are estimated to be $2,000 per month.

 

Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Hallmark Venture Group, Inc., a related party, at no charge.

 

 

The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities 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. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.

 

No provision for federal income taxes has been recorded due to the net operating loss carry forwards totaling approximately $662,875 as of February 29, 2016, that will be offset against future taxable income.  The available net operating loss carry forwards of approximately $662,875 will expire in various years through 2035. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future tax loss carry forwards.

 

The actual income tax provisions differ from the expected amounts calculated by applying the statutory income tax rate to the Company's loss before income taxes.  The components of these differences are as follows at February 29, 2016 and August 31, 2015:

 

 

On September 1, 2015, Service Team Inc leased an industrial building located on three acres of land at 1818 E. Rosslynn Avenue, Fullerton, California.  The lease rate is $10,000 per month for the first six months; then $14,000 per month for the remaining six years of the lease.  Service Team Inc is obligated to pay the fire insurance and property taxes on the building that are estimated to be $2,000 per month.

 

Our principal executive offices are located in 600 square feet in a building at 18482 Park Villa Place, Villa Park, California 92861. The space is furnished by Hallmark Venture Group, Inc., a related party, at no charge. 

 

Our operations during the six month periods ending February 29, 2016 and  February 28, 2015, were managed through two operating segments, as shown below. We disclose the results of each of our operating segments in accordance with ASC 280, Segment Reporting. Each of the operating segments was managed under a common structure chaired by our Chief Executive Officer and discrete financial information for both of the segments was available. Our Chief Executive Officer used the operating results of each of the two operating segments for performance evaluation and resource allocation and, as such, was the chief operating decision maker. The activities of each of our segments from which they earned revenues and incurred  expenses are described below: 

 

 

 

Summarized financial information concerning reportable segments is shown in the following table for the three months ended: 

 

 

There were no subsequent events through the date that the financial statements were issued. 

 

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

 

Overview of Our Company

 

Service Team Inc. (the "Company") was incorporated pursuant to the laws of the State of Nevada on June 6, 2011.  The Company was organized to comply with the warranty obligations of electronic devices manufactured by companies outside of the United States.  The business proved to be unprofitable and the Company reduced its warranty and repair operations.  On June 5, 2013, Service Team Inc. acquired 25,000 common shares of Trade Leasing, Inc., granting 100% ownership, for 4,000,000 shares of its common stock; in addition, both entities are under common control.   Trade Leasing, Inc., a California corporation, was incorporated on November 1, 2011, and commenced business January 1, 2013.  Trade Leasing, Inc. is principally involved in the manufacturing, maintenance and repair of truck bodies.  Service Team Inc. and Trade Leasing Inc. have not been involved in a bankruptcy, receivership or any similar proceeding. The acquisition of Trade Leasing Inc. is a major change in the operations of the company. Trade Leasing is being operated as a separate division of Service Team Inc.

 

Trade Leasing Division.  This division is involved in the manufacture and repair of truck bodies.  The Company manufactures truck bodies that are attached to a truck chassis which consists of an engine, drive train, a frame with wheels, and in some cases, a cab.  The truck chassis is manufactured by third parties that are major automotive or truck companies.  These companies do not typically build specialized truck bodies.  The company is also involved in other products used by the trucking industry.   The company operates a complete manufacturing and repair facility in South Gate, California.  The facility manufactures both custom and standard production truck bodies in approximately 70 different models designed to fill the specialized demands of the user.   The vans are available for hauling dry freight or refrigerated freight.  The refrigerated vans are built with two to four inches of foam insulating that is sprayed in place for hauling refrigerated products such as meats, vegetables, flowers and similar products.  The Company installs different types of cooling systems in the trucks.  This varies from motor driven units installed outside the van body or refrigeration units driven off the engine of the truck.  Some refrigerated trucks use a system called "cold plate" where a large metal plate is cooled by power while the truck is parked.  The power is then unplugged and the truck will stay cool for many hours.  The Company's customers are auto dealers and users of trucks; such as dairies, food distributors and local delivery. The company has approximately 400 customers. One customer South Bay Ford represented more than 10% of sale in the last 12 months. The company is not dependent on a few major customers. Trade Leasing purchases raw materials from approximately 25 suppliers.  There are several hundred similar suppliers of comparable materials in the local area. Trade Leasing Inc. purchases refrigeration units from Thermoking Corporation a division of United Technologies and Carrier Corporation, a division of Ingersol Rand Corporation. The two companies represent more than 80% of the refrigeration unit market. There are several other manufactures of refrigeration units that represent a small part of the market. Trade Leasing Inc. employs 23 factory workers and three management personnel.  The management personnel make all of the sales and manage the factory. The company has all of the government licenses necessary to conduct its business. These include 9 different city, county and state licenses covering vehicle transportation, air quality, hazard waste (Paint), land or building use, and sales tax.

 

Liquidity and Capital Resources

 

As of February 29, 2016, we had assets of $256,303 including current assets of $184,865.   We have accounts payable of $197,972, convertible notes payable of $69,463, accrued expenses of $101,757.  Hallmark Venture Group, Inc. is prepared to advance us additional funds as needed. Accrued expenses are for work performed by employees during the organizational and operational stages of the Company. There is no firm date for which these are to be paid. It is to be repaid when we have funds available.  Since inception we have also raised $354,382 from the sale of our common stock.  We believe our ability to achieve commercial success and continued growth will be dependent upon our continued access to capital either through additional sale of our equity or cash generated from operations. We will seek to obtain additional working capital through the sale of our securities. We will attempt to obtain additional capital through bank lines of credit; however, we have no agreements or understandings with third parties at this time.

 

 

Results of Operations

 

Three Months Ended February 29, 2016 compared to the Three Months Ended  February 28, 2015

 

Sales during the three month period ended February 29, 2016, were $781,390 compared to $612,394 for the three month period ending February 28, 2015.   Our cost of sales for the three month period ending February 29, 2016 was $777,428, compared to $558,323 for the three month period ending February 28, 2015. Our operating expenses for the three month period ending February 29, 2016, were $152,077 compared to $608,938 for the three month period ending February 28, 2015.  We had a net loss during the three month period ending February 29, 2016, of $184,457; compared to a net loss of $558,559 during the three month period ending February 28 2015.

Six Months Ended February 29, 2016 compared to the Six Months Ended February 28, 2015

 

Sales during the six month period ended February 29, 2016, were $1,706,493 compared to $1,166,021 for the six month period ending February 28, 2015.   Our cost of sales for the six month period ending February 29, 2016 was $1,417,069, compared to $1,071,706 for the six month period ending February 28, 2015. Our operating expenses for the six month period ending February 29, 2016, were $335,523 compared to $668,160 for the six month period ending February 28, 2015.  We had net loss during the six month period ending February 29, 2016, of $69,291; compared to a net loss of $578,003 during the six month period ending February 28 2015.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

Not Applicable

 

Item 4.  Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(c) and 15d – 15(e)). Based upon that evaluation, our principal executive officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer, as appropriate to allow timely decisions regarding required disclosure.

  

 

Inherent Limitations of Internal Controls

 

Our Principal Executive Officer does not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. 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 if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting, other than those stated above, during our most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II—OTHER INFORMATION

  

Item 1.  Legal Proceedings.

 

None

Item 1A. Risk Factors.

 

Not applicable.

 

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.

 

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain officers; Compensatory Arrangements of Certain Officers.

 

On April 13, 2015, Carlos Arreola resigned as chief executive officer and as director.  Mr. Arreola's resignation is not because of any disagreement with the registrant.  We have provided Mr. Arreola with a copy of this disclosure prior to the filing thereof and informed him that he had the opportunity to provide the registrant with correspondence stating whether he agrees or disagrees with the disclosure contained in this current report which the registrant would also file such correspondence as an exhibit to this current report or an amendment thereto.

Robert Cashman, remains as the sole director of the registrant and has assumed the role of chief executive officer in addition to that of chief financial officer.  There is no change to Mr. Cashman's compensation.

 

 

 

Item 6. Exhibits.

 

 

31.1  Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302.

 

31.2  Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302.

 

32.l  Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

 

32.2  Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

 

101   Interactive Data Files

 

 

 

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.