UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 205495

FORM 10-Q

 

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

 

Commission file number 000-53780

 

INTERNATIONAL LEADERS CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada	27-0491634
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
9811 W Charleston Blvd., Suite 2-518 Las Vegas, Nevada	89117
(Address of Principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code.	(857) 210-5004

 

  (Former name and former address, 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. Yes x 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) 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ¨

 

	Large accelerated filer                 ¨	Accelerated filer                    ¨
	Non-accelerated filer                   ¨	Smaller reporting company   x
	Emerging Growth Company        ¨

  

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

 

As of November 14, 2018, the registrant had 249,386,285 outstanding shares of Common Stock.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 INTERNATIONAL LEADERS CAPITAL CORPORATION

INDEX

 

		Page Number
PART I.	FINANCIAL INFORMATION
Item 1	Financial Statements:
	Condensed Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and June 30, 2018	5
	Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2018 and 2017 (Unaudited)	6
	Condensed Consolidated Statement of Stockholders’ Deficiency for the Three Months Ended September 30, 2018 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2018 and 2017 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited) - Three months Ended September 30, 2018 and 2017	9
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4T	Controls and Procedures	19
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	20
Item 1A	Risk Factors	20
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3	Defaults upon Senior Securities	20
Item 4	Mine Safety Disclosures	20
Item 5	Other Information	20
Item 6	Exhibits	20
SIGNATURES		21
EXHIBITS

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

Forward-Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “1933 Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q, including any projections of earnings, revenue or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors set forth in “Part II, Item 1A – Risk Factors” below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. All forward looking statements and reasons why results may differ included in this report are made as of the date hereof and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company,” “International Leaders Capital Corporation,”, “the Company ”, “we,” “us” and “our” refer to International Leaders Capital Corporation, a Nevada corporation.

 

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

INTERNATIONAL LEADERS CAPITAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		September 30,				June  30,
		2018				2018
Assets			(Unaudited)
Current assets:
Cash and cash equivalents		$	78,554			$	8,117
Advances to employees			7,818				—
Prepaid expenses			7,199				11,000
Lease deposit			44,158				45,802
Total current assets			137,729				64,919
Office equipment			7,104				12,254
Total assets		$	144,833			$	77,173
Liabilities and Stockholders’ Deficiency
Current Liabilities:
Accounts payable and accrued liabilities (including accounts payable due to related party of $0 and $66,650 at September 30, 2018 and June 30, 2018, respectively)		$	87,586			$	123,106
Accrued compensation-related party			64,000				301,322
Deferred revenue			125,725				—
Advances payable – related parties			156,040				205,456
Convertible notes – related party, net of discount of $37,066 and $35,452 at September 30, 2018 and June 30, 2018, respectively			11,495				80,656
Total current liabilities			444,846				710,540
Non-redeemable convertible note – related party			—				43,180
Commitments and contingencies
Stockholders' Deficiency:
Preferred stock; par value $0.01; 48,900,000 shares authorized;  no shares issued and outstanding			—				—
Series A Convertible Preferred Stock; par value $0.01; 1,000,000 shares authorized; no shares issued and outstanding			—				—
Series B Preferred Stock; par value $0.01; 100,000 shares authorized; 25,000 shares issued and outstanding			250				250
Common stock; par value $0.001; 750,000,000 shares authorized; 249,386,285 and 2,311,285 shares issued and outstanding at September 30, 2018 and June 30, 2018, respectively			249,386				2,311
Additional paid-in capital			121,910,970				121,375,474
Additional other comprehensive income			3,083				—
Notes receivable			(5,000,000	)			(5,000,000	)
Accumulated deficiency			(117,463,702	)			(117,054,582	)
Total stockholders' deficiency			(300,013	)			(676,547	)
Total liabilities and stockholders’ deficiency		$	144,833			$	77,173
See accompanying notes

INTERNATIONAL LEADERS CAPITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three months September 30, 2018				Three months September 30, 2017
Revenue		$	—			$	—
Cost of revenue			—				—
Gross profit			—				—
Operating costs:
Compensation			254,370				29,501
General and administrative			160,680				31,031
Total operating expenses			415,050				60,532
Loss from operations			(415,050	)			(60,532	)
Other income (expense):
Interest expense			(6,220	)			(38,937	)
Private placement costs			—				(130,381	)
Change in fair value of derivative liabilities			—				35,289
Gain on debt settlement			12,150				—
Total other income (expense)			5,930				(134,029	)
Net loss		$	(409,120	)		$	(194,561	)
Net loss per share – basic and diluted		$	(0.00	)		$	(0.12	)
Weighted average number of common shares outstanding – basic and diluted			144,870,524				1,574,179

See accompanying notes

 

 

 

 

 

 

 

INTERNATIONAL LEADERS CAPITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY

(Unaudited)

		Common Shares				Common Stock				Series B Preferred Shares				Series B Preferred Stock				Additional Paid-in Capital				Accumulated Other Comprehensive Income				Accumulated Deficit				Note Receivable				Total Stockholders’ Deficiency
Balance June 30, 2018			2,311,285			$	2,311				25,000			$	250			$	121,375,474			$	—			$	(117,054,582	)		$	(5,000,000	)		$	(676,547	)
Shares issued for cash			247,000,000				247,000				—				—								—				—				—				247,000
Fair value of shares in excess of purchase price paid by management			—				—				—				—				201,120				—				—				—				201,120
Shares issued for compensation			75,000				75				—				—				41,175				—				—				—				41,250
Gain on settlement of debt and accrued interest - related parties treated as a capital contribution			—				—				—				—				286,201				—				—				—				286,201
Beneficial conversion feature on issuance of convertible notes - related party			—				—				—				—				7,000				—				—				—				7,000
Accumulated other comprehensive income			—				—				—				—				—				3,083				—				—				3,083
Net loss			—				—				—								—				—				(409,120	)			—				(409,120	)
Balance September 30, 2018			249,386,285			$	249,386				25,000			$	250			$	121,910,970			$	3,083			$	(117,463,702	)		$	(5,000,000	)		$	(300,013	)

See accompanying notes

 

 

 

 

INTERNATIONAL LEADERS CAPITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited) 

		Three months ended September 30, 2018				Three months ended September 30, 2017
Cash Flows from Operating Activities:
Net loss		$	(409,120	)		$	(194,561	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount			5,386				34,107
Depreciation			348				—
Fair value of shares issued for compensation			242,370				—
Private placement costs			—				130,381
Gain on debt settlement			(12,150	)			—
Change in fair value of derivative liability			—				(35,289	)
Accrued interest			834				4,830
Changes in operating assets and liabilities:
Prepaid expenses			3,801				2,500
Accounts receivable and other			(7,818	)			—
Accounts payable and accrued expenses			(23,120	)			12,163
Accrued compensation-related parties			12,000				(12,999	)
Deferred revenue			125,725				—
Net cash used in operating activities			(61,744	)			(58,868	)
Cash Flows from Investing Activities:
Share of affiliates in office equipment costs			4,802				—
Cash provided by investing activities			4,802				—
Cash Flows from Financing Activities:
Proceeds from convertible notes-related parties			7,000				100,000
Payment made on convertible notes-related parties			(58,142	)			(100,000	)
Payment on non-redeemable convertible note			(43,180	)			—
Advances from related parties			29,974				—
Repayment of advances-related parties			(25,000	)			(11,000	)
Repayment of advances			(35,000	)			—
Proceeds from the issuance of common stock-related party			247,000				—
Net cash provided (used in) by financing activities			122,652				(11,000	)
Change in foreign exchange			4,727				—
Net change in cash and cash equivalents			70,437				(69,868	)
Cash and cash equivalents, beginning of year			8,117				92,004
Cash and cash equivalents, end of year		$	78,554			$	22,136
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest paid		$	—			$	—
Income tax paid		$	—			$	—
NON-CASH FINANCING ACTIVITIES
Beneficial conversion feature recorded as discount upon issuance of convertible notes-related party		$	7,000			$	5,000
Gain on settlement of debt–related parties		$	286,201			$	—

See accompanying notes

INTERNATIONAL LEADERS CAPITAL CORPORATION

Notes to Condensed Consolidated Financial Statements

Three months ended September 30, 2018 and 2017

(Unaudited)

 

NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

International Leaders Capital Corporation ("the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc.

 

On May 28, 2017, Star Century Entertainment Corporation, a shareholder of the Company, agreed to sell 25,000 shares of the Company’s Series B preferred shares, representing approximately 99% of the voting control of the Company, to ILC Holdings, LLC and the Company experienced a change in control. Cihan Huang is the managing member of ILC Holdings, LLC. On December 1, 2017, ILC Holdings, LLC sold the 25,000 shares of the Company’s Series B Preferred Stock to Cihan Huang.

 

Effective August 2, 2017, the Company’s Board of Directors and a majority of the shareholders of the Company amended the Company’s Articles of Incorporation to (i) change the name of the Company to International Leaders Capital Corporation and (ii) effect a 1-for-50 reverse common stock split. All common stock share and per-share amounts for all periods presented in these consolidated financial statements have been adjusted retroactively to reflect the reverse stock split.

 

On December 1, 2017, the Company purchased International Leadership Center Holdings Limited (“ILC”) for $2,500. ILC has two subsidiaries, Hong Kong ILC Business Services and Shenzhen Qian Chuang Hui Technology Incubator Limited (“Shenzhen QCH Incubator”). Prior to December 1, 2017, ILC or its subsidiaries did not have any operations and the purchase price of $2,500 was expensed. In April 2018, ILC through its subsidiary Shenzhen QCH Incubator, leased an office space in Shenzhen, Peoples Republic of China (“PRC”) and purchased some office equipment to be used in future planned operations. As of September 30, 2018, the Company, and ILC and its subsidiaries, have not commenced their planned principal operations and are in the process of setting up a consultancy business.

 

The Company operates as a financial services firm which provide consulting services for businesses and training programs for general investors. The Company earns revenue from business training and consulting, and jointly investing in projects and ventures for companies which it consults with. In September 2018, the Company received deposits of $125,725 for listing services which the Company expects will be generally earned over the next year as services are provided. The Company’s administrative headquarters are in Las Vegas, Nevada with planned operations in the PRC.

 

Basis of presentation

 

The unaudited condensed consolidated financial statements of the Company for the three months ended September 30, 2018 and 2017 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of June 30, 2018 was derived from the audited financial statements included in the Company's financial statements as of and for the fiscal year ended June 30, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on September 28, 2018. These financial statements should be read in conjunction with that report.

 

Going concern

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the three months ended September 30, 2018, the Company incurred a net loss of $409,120 and used cash in operating activities of $61,744, and at September 30, 2018, had a stockholders’ deficiency of $300,013. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the consolidated financial statements are issued. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern.

 

The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and to ultimately achieve profitable operations. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operating costs and allow it to continue as a going concern through November 2019. The Company’s officers or principal shareholders have committed to making advances or loans to pay for these legal, accounting, and administrative costs.

 

The Company hopes to be able to attract suitable investors for our business plan, which will not require us to use our cash. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.

 

Principles of consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, International Leadership Center Holdings Limited, Hong Kong ILC Business Services Limited and Shenzhen Qian Chuang Hui Technology Incubator Limited. All intercompany transactions and balances have been eliminated in consolidation.

 

Foreign currency translation and transactions

 

The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company’s operating subsidiaries maintain their books and records in their respective local currency, which consists of the Chinese Renminbi (“RMB”), and Hong Kong Dollars (“HK$”), which is also the respective functional currency of the subsidiaries.

 

In general, for consolidation purposes, assets and liabilities of the Company’s subsidiaries whose functional currency is not the US$ are translated into US$ using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of a foreign subsidiary are recorded as a separate component of accumulated other comprehensive loss within stockholders’ equity.

 

Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:

 

		As of and for the three months ended September 30,
		2018				2017
Period-end RMB : US$1 exchange rate		$	6.8690			$	—
Period-average RMB : US$1 exchange rate		$	6.8127			$	—
Period-end  HK$ : US$1 exchange rate		$	7.8282			$	—

 

Loss per share

 

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive.

 

At September 30, 2018 and 2017, we excluded the outstanding common stock equivalents summarized below as their effect would have been anti-dilutive:

 

		September 30, 2018				September 30, 2017
Common stock issuable upon conversion of convertible and non-redeemable convertible notes payable			4,178,913				5,378,010
Common stock issuable upon conversion of accrued compensation			116,364				240,821
Total			4,295,277				5,618,831

 

Share-Based Compensation

 

The Company may periodically issue shares of common stock, stock options, or warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the FASB whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

The fair value of the Company's common stock option grants are estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

 

Fair Value of 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 are 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 estimated fair value of certain financial instruments, including cash and accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The recorded values of the convertible notes-related parties and non-redeemable convertible note approximates their fair values based upon their effective interest rates.

 Segments  

The Company operates in one segment for its planned consultancy business. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements.

 

Concentrations

 

At September 30, 2018, the Company’s assets include $132,803 of assets that are located in the PRC.

 

Economic and Political Risks

 

The Company’s planned operations in the PRC will be subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

 

Revenue recognition

 

The Company’s revenue consists of revenue from providing business consulting and corporate advisory services (“service revenue”).

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09, as amended, is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principles based approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Under ASU 2014-09, revenue will be recognized when performance obligations under the terms of a contract are satisfied, which generally occurs upon shipment or delivery to customers based on written sales terms, which is also when control is transferred. Revenue will be measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer. The Company adopted the guidance of ASU 2014-09 on July 1, 2018. The adoption of the new guidance did not impact the Company’s consolidated financial statements.

 

For certain of our service contracts providing assistance to clients in capital market listings (“Listing services”), our services provided are considered to be one performance obligation. Revenue and expenses are deferred until the performance obligation is complete and collectability of the consideration is probable. For service contracts where the performance obligation is not completed, deferred costs of revenue are recorded as incurred and deferred revenue is recorded for any payments received on such yet to be completed performance obligations. On an ongoing basis, management monitors these contracts for profitability and when needed may record a liability if a determination is made that costs will exceed revenue. As of September 30, 2018, the Company has reflected deferred revenue of $125,725 related to cash received prior to the completion of the performance obligation.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

 

NOTE 2. ACCRUED COMPENSATION-RELATED PARTIES

 

 

		September 30, 2018				June 30, 2018
Accrued compensation, CEO (a)		$	64,000			$	52,000
Accrued compensation, shareholder/consultant (b)			—				249,322
		$	64,000			$	301,322

 

(a)

Effective June 1, 2017, the Company entered in an employment agreement with its Chief Executive Officer for annual compensation of $24,000. The executive has the option to accept shares of the Company’s common stock in lieu of cash based on a 50% discount to the average stock price, as defined. The option to accept shares of common stock in lieu of cash is accounted for at the fair value of the potentially issuable common shares and is subject to adjustment at each reporting date based on the change in market value of the shares. At June 30, 2018, accrued compensation due to the executive was $52,000. For the three months ended September 30, 2018, compensation expense of $12,000 was recorded, including $6,000 accrual of annual compensation and $6,000 accrual for the fair value that could be paid in shares of common stock related to this employment agreement. At September 30, 2018 the accrued compensation due to the executive was $64,000, which if the executive elected to be paid in shares of common stock, would result in the issuance of 116,364 of the Company’s common stock.

(b)

In April 2017, a consulting agreement was signed between a shareholder/consultant and the Company. Pursuant to this agreement, the Company agreed to pay $7,500 per month in cash for consulting services through December 31, 2017, and month to month thereafter. At June 30, 2018 the accrued compensation due under this agreement was $22,500.   At June 30, 2018, the Company also owed the shareholder/consultant $226,822, related to a consulting contract that had terminated in April 2017. Pursuant to the terms of that agreement, the shareholder/consultant has the option to accept shares of the Company’s common stock in lieu of cash based on a 50% discount to the average stock price, as defined.   On August 10, 2018, the shareholder/consultant agreed to fully settle the amounts owed to him under the both consulting agreements aggregating $249,322 (See Note 6).

 

NOTE 3. ADVANCES PAYABLE

 

The Company from time to time borrows from its principal shareholders, or others, to pay expenses such as filing fees, accounting fees and legal fees. These advances are non-interest bearing, unsecured, and generally due upon demand. At September 30, 2018 and June 30, 2018, the Company was obligated for the following advances:

 

		September 30,   2018				June 30, 2018
Advances due to CEO		$	149,829			$	119,865
Advances due to director			6,211				6,201
Advances due to shareholder/consultant			—				25,000
Advances due to former officers, directors and shareholders			—				54,390
		$	156,040			$	205,456

 

On August 10, 2018, the advances due to shareholder of $25,000 and advances due to former officers, directors and shareholders of $54,390 were fully settled (See Note 6).

 

NOTE 4. CONVERTIBLE NOTES-RELATED PARTY

 

A summary of convertible notes payable-related party as of September 30, 2018 and June 30, 2018 is as follows:

 

 

		September 30, 2018				June 30, 2018
Convertible notes payable-related party (a)		$	—			$	75,381
Convertible notes payable-ILC Holdings (b)			48,561				40,727
Unamortized note discounts			(37,066	)			(35,452	)
		$	11,495			$	80,656

 

(a)

Convertible notes payable-related party are unsecured, accrue interest at 10% per annum, and are due from January 2019 through November 2019. These notes are convertible into shares of the Company’s common stock at a conversion price ranging from of $0.01 per share to $0.10 per share. At June 30, 2018, principal and accrued interest totaled $75,381.   On August 10, 2018, the convertible notes payable-related party of $75,381 were settled (See Note 6).

(b)

In April 2018, the Company issued two convertible notes to ILC Holdings, an entity controlled by the Company’s CEO, for $30,000 and $10,000, respectively. The convertible notes were unsecured, accrued interest at 8% per annum, and are due on April 1, 2020 and April 26, 2020, respectively. At June 30, 2018, $727 of accrued interest was added to principal, and the total outstanding balance of these notes amounted to $40,727, and was convertible into 4,072,767 shares of common stock.   In September 2018, the Company issued a convertible note to ILC Holdings, an entity controlled by the Company’s CEO, for $7,000. The convertible note is unsecured, accrues interest at 8% per annum, and due on September 11, 2019. The Company determined that the notes contained a beneficial conversion feature of $7,000 since the market price of the Company’s common stock were higher than the conversion price of the notes when they were issued. The beneficial conversion feature of $7,000 was recorded as debt discount to be amortized over the term of the notes or in full upon the conversion of the corresponding notes.   At September 30, 2018 principal of $47,000 and accrued interest of $1,561 are due under the notes and the total outstanding balance of this note amounted to $48,561 and is convertible into 4,178,913 shares of common stock.   At June 30, 2018 the unamortized note discount was $35,452. During the three months ended September 30, 2018, the discount was increased by the $7,000 discussed above, and $5,386 of discount was amortized, At September 30, 2018 the unamortized note discount was $37,066.

 

NOTE 5. NON-REDEEMABLE CONVERTIBLE NOTE-RELATED PARTY

 

Non-redeemable convertible note-related party is secured by all the assets of the Company, accrued interest at 20% per annum through June 30, 2016, and was non-interest bearing thereafter, and was due August 1, 2019. The Company may prepay the note in readily available funds at any time prior to the maturity date. The Company has the right to convert the note into shares of the Company’s common stock at any time prior to the maturity date at a fixed price of $0.05 per share of common stock. At June 30, 2018, principal and accrued interest totaled $43,180.

 

On August 10, 2018, the non-redeemable convertible note and accrued interest of $43,180 were fully settled (See Note 6).

 

NOTE 6. SETTLEMENT OF LIABILITIES

 

At June 30, 2018 the Company owed $16,750 to various unrelated parties, made up of accounts payable of $16,750. On August 10, 2018, the Company fully settled the total liabilities of $16,750 for cash payments of $4,600. The resulting gain of $12,150 was recorded as a gain on settlement of debt in the condensed consolidated statements of operations.

 

At June 30, 2018 the Company owed $513,923 to a related party stockholder/consultant and various former officers, directors and shareholders of the Company, made up of accounts payable of $66,650, accrued consulting fees of $249,322, convertible notes and accrued interest payable of $75,381, non-redeemable note and accrued interest payable of $43,180, and advances due of $79,390. On August 10, 2018, the Company fully settled the total liabilities of $513,923 for a cash payment of $227,722. The resulting gain on settlement of debt-related party of $286,201 was recorded as a capital contribution in the condensed consolidated statement of stockholders’ deficiency.

 

NOTE 7. STOCKHOLDERS’ DEFICIENCY

 

Common stock

 

In July 2018 and August 2018, the Company issued 247,000,000 shares of common stock for cash proceeds of $247,000 ($0.001 per share). As part of the issuance, 66,802,163 shares of common stock were issued to the Company’s CEO, 33,992,000 were issued to the Company’s COO, 72,500,000 shares of common stock were issued to 7 individuals other than the Company’s CEO that are members of ILC Holdings, LLC, and 73,705,837 shares of common stock were issued to 90 other individuals.

 

Pursuant to generally accepted accounting principles related to share-based payment arrangements with employees, the Company recorded compensation costs of $201,120 to account for the difference between the purchase price $0.001 per share and the fair value of $0.003 per share on the issuance of 100,794,163 shares of common stock to the Company’s CEO and COO.

 

On August 15, 2018, the Company issued 75,000 shares of common stock with a fair value of $41,250 ($0.55 per share) for services.

 

 

 

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

Company Overview

 

International Leaders Capital Corporation (“ILCC” or "the Company") was organized under the laws of the State of Nevada on May 21, 2009.

 

On May 28, 2017, Star Century Entertainment Corporation agreed to sell 25,000 shares of the Company’s Series B preferred shares, representing approximately 99% of the voting control of the Company, to ILC Holdings, LLC and the Company experienced a change in control. Cihan Huang is the managing member of ILC Holdings, LLC. On December 1, 2017, ILC Holdings, LLC sold the 25,000 shares of the Company’s Series B Preferred Stock to Cihan Huang.

 

On December 1, 2017, the Company purchased International Leadership Center Holdings Limited (“ILC”) for $2,500. ILC has two subsidiaries, Hong Kong ILC Business Services and Shenzhen Qian Chuang Hui Technology Incubator Limited (“Shenzhen QCH Incubator”). Prior to December 1, 2017, ILC or its subsidiaries did not have any operations and the purchase price of $2,500 was expensed. In April 2018, ILC through its subsidiary Shenzhen QCH Incubator, leased an office space in Shenzhen, Peoples Republic of China (“PRC”) and purchased some office equipment to be used in future planned operations.

 

As of September 1, 2018, the Company and its subsidiaries, planned principal operations to operate a consultancy business commenced.

 

The Company plans to operate a financial services firm which provides consulting services for businesses and training programs for general investors. The Company anticipates earning revenue from (1) business training and consulting and (2) jointly investing in quality projects and ventures for companies which we serve. Our professional investment education program commences with a three day intensive program for general investors which is further reinforced with monthly training courses. In addition, we plan to offer a roadshow platform for OTC listed companies which guides clients through the fund raising process. The Company’s administrative headquarters are based in Las Vegas, Nevada with planned operations in the People’s Republic of China (“PRC”) and Asia.

 

RESULTS OF OPERATIONS

 

THREE MONTHS ENDED SEPTEMBER 30, 2018 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2017

 

REVENUE

 

For the three months ended September 30, 2018 and 2017, we had no revenue.

OPERATING COSTS

 

Compensation includes salaries, stock-based compensation expenses and benefits paid and payable to the CEO and COO of the Company and a consultant/shareholder of the Company. Compensation expense was $254,370 for the three months ended September 30, 2018, compared to $29,501 for the three months ended September 30, 2017.

 

For the three months ended September 30, 2018, compensation expense included $6,000 for accrual of annual compensation due, $6,000 for the fair value that could be paid in shares of common stock and $242,370 of stock-based compensation. For the three months ended September 30, 2017, the Company recorded $29,501 of compensation related to these agreements. The increase in compensation expense is primarily due to stock based compensation paid to the CEO and COO of the Company.

 

General and administrative expenses were $168,680 for the three months ended September 30, 2018, compared to $31,031 for the three months ended September 30, 2017. Administration expense includes accounting, audit, legal and transfer agent costs related to SEC compliance and investor relation expenses. The increase in general and administrative expenses is primarily due to increase in rent and administrative expenses related to the Company’s leasing of an office space in Shenzhen, PRC.

 

OTHER INCOME (EXPENSE)

 

Other income (expense) includes $12,150 gain on debt settlement.

 

Other income (expense) includes interest expense of $6,220 and $38,537 for the three months ended September 30, 2018 and 2017, respectively. The decrease in interest expense is due to decrease of amortization of debt discount on the convertible note-ILC Holdings LLC and the settlement of various debts on August 10, 2018.

 

NET LOSS

 

Our net loss for the three months ended September 30, 2018 was $409,120 compared to net loss of $194,561 for the three months ended September 30, 2017. Our losses increased because of increase in compensation expense and general and administrative expenses.

 

LIQUIDITY

 

As of September 30, 2018, we had cash of $78,554 and total liabilities of $444,846. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations for the next 12 months.

 

The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the three months ended September 30, 2018, the Company incurred a net loss of $409,120 and used cash in operating activities of $61,744, and at September 30, 2018, had a stockholders’ deficiency of $300,013. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the consolidated financial statements are issued. The Company’s independent registered public accounting firm, in their report on the Company’s consolidated financial statements for the year ending June 30, 2018, expressed substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the consolidated financial statements are issued. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern.

 

The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and to ultimately achieve profitable operations. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. Over the next 12 months, the Company expects to expend up to approximately $50,000 for legal, accounting and administrative costs. The Company’s officers or principal shareholders have committed to making advances or loans to pay for these legal, accounting, and administrative costs. The Company has not yet determined the amount of cash that will be necessary to fund its planned operations in China.

 

We hope to be able to attract suitable investors for our business plan. The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.

 

OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS

 

Our controlling shareholders expect to advance us additional funding for operating costs in order to implement our business plan. The funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the resources of our controlling shareholders. The loans from our controlling shareholders are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.

 

PLAN OF OPERATION AND FUNDING 

During the next twelve months we anticipate incurring costs related to:

 

      (i) filing of Exchange Act reports, and

      (ii) costs relating to developing our business plan

We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with amounts to be loaned to or invested in us by our stockholders, management or other investors.

 

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

 

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results may differ under different estimates and assumptions.

 

The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our consolidated financial statements because they inherently involve significant judgments and uncertainties.

 

Revenue recognition

 

The Company’s revenue consists of revenue from providing business consulting and corporate advisory services (“service revenue”).

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09, as amended, is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principles based approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Under ASU 2014-09, revenue will be recognized when performance obligations under the terms of a contract are satisfied, which generally occurs upon shipment or delivery to customers based on written sales terms, which is also when control is transferred. Revenue will be measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer. The Company adopted the guidance of ASU 2014-09 on July 1, 2018. The adoption of the new guidance did not impact the Company’s consolidated financial statements.

 

Share-Based Compensation

 

The Company may periodically issue shares of common stock, stock options, or warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the FASB whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

The fair value of the Company's common stock option grants are estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

 

Recent Accounting Pronouncements

 

See Note 1 of the financial statements for discussion of recent accounting pronouncements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

 

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

 

The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. 

 

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending June 30, 2019, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2018 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

 

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

 

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.

Except as so indicated in Exhibits 32.1 and 32.2, the following exhibits are filed as part of, or incorporated by reference, to this Quarterly Report on Form 10-Q.

 

			Incorporated by reference
Exhibit	Exhibit Description	Filed herewith	Form	Period ending	Exhibit	Filing date
3.1	Articles of Incorporation		10/A#2		3.1	11/5/2009
3.2	Bylaws		10/A #2		3.2	11/5/2009
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101	Interactive Data Files for the International Leaders Capital Corporation Form 10Q for the period ended September 30, 2018	X

  

 

 SIGNATURES

In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	INTERNATIONAL LEADERS CAPITAL CORPORATION
Date:  November 19, 2018	By:	/s/ Cihan Huang
		Cihan Huang, Chief Executive Officer, President and Director (Principal Executive Officer)
	By:	/s/ Zhou Bing
		Zhou Bing, Chief Operating Officer, Secretary and Treasurer (Principal Accounting and Financial Officer)