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| EX-32 - STRATUS CAPITAL CORP | ex32_1.htm |
| EX-31 - STRATUS CAPITAL CORP | ex31_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
| [X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
| [ ] |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|
For the transition period from __________ to ___________
000-56093
Commission file number
| Stratus Capital Corp. |
| (Exact name of registrant as specified in its charter) |
| Delaware | 83-1161556 | |
| State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) | |
|
8480 East Orchard Road, Suite 1100 Greenwood Village, Colorado
|
80111 | |
| (Address of principal executive offices) | (Zip Code) |
(720) 214-5000
Registrant’s telephone number, including area code
______________________________________
(Former Address and phone of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each Class | Trading Symbol | Name of each exchange on which registered |
| N/A | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act:
Common
Title of each class
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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
| Yes | [X] | No | [_] |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 for Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Yes | [X] | No | [_] |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [_] | Accelerated filer | [_] |
| Non-accelerated filer | [X] | Smaller reporting company | [X] |
| Emerging growth company | [X] | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes | [X] | No | [_] |
Indicate the number of share outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As November 16, 2020, there were 21,525,481 shares of the registrant’s common stock, $0.0001 par value, issued and outstanding.
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PART I – FINANCIAL INFORMATION
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NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
NOTE 1. NATURE OF OPERATIONS
Nature of Business
Stratus Capital Corp., a Delaware corporation, (“Stratus Capital,” “the Company,” “We," "Us," or “Our”) is a publicly quoted real estate development company seeking to develop or redevelop residential, commercial or mixed-use properties.
History
Stratus Capital was incorporated in Delaware on April 13, 2018. Effective June 28, 2018 (the Company’s deemed date of inception), following a corporate reorganization pursuant to a reverse recapitalization, Stratus Capital became the reorganized successor to Ashcroft Homes Corporation, a publicly quoted real estate company that ceased trading in 2004.
NOTE 2. GOING CONCERN
Our financial statements are prepared using accounting principles generally accepted in the United States of America (“GAAP”) applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We have no ongoing business or income and for the nine-month period ended September 30, 2020 incurred a loss of $105,530 and had an accumulated deficit of $290,407 as of September 30, 2020. These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties. Our ability to continue as a going concern is dependent upon our ability to raise additional debt or equity funding to meet our ongoing operating expenses and ultimately in merging with another entity with experienced management and profitable operations. No assurances can be given that we will be successful in achieving these objectives.
We have not commenced operations as yet and consequently have not been directly impacted by the Covid-19 outbreak at this time. However, the detrimental effect of the Covid-19 outbreak on the economy as a whole may have a detrimental impact on our ability to raise funding and commence operations for the foreseeable future.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The summary of significant accounting policies is presented to assist in the understanding of the financial statements. These policies conform to GAAP and have been consistently applied. The Company has selected December 31 as its financial year end. The Company has not earned any revenue to date.
Interim Financial Statements
The accompanying unaudited interim condensed financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2020 and for the related periods presented, have been included. The results for the nine-month periods ended September 30, 2020 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto for the year ended December 31, 2019 filed in our Form 10-K on April 15, 2020.
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Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents:
We maintain cash balances in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. As of September 30, 2020 and December 31, 2019 our cash balances were $356 and $244, respectively.
Fair Value Measurements:
ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.
Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
Our financial instruments consist of our cash, prepaid expenses, accounts payable, accrued expenses - related parties and note payable – related party. The carrying amount of our prepaid expenses, accounts payable, accrued expenses- related parties and note payable – related party approximates their fair values because of the short-term maturities of these instruments
Related Party Transactions:
A related party is generally defined as (i) any person that holds 10% or more of our membership interests including such person's immediate families, (ii) our management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with us, or (iv) anyone who can significantly influence our financial and operating decisions. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. See Notes 5, 6 and 8 below for details of related party transactions in the period presented.
Leases:
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) as assets, operating lease non-current liabilities, and operating lease current liabilities in our balance sheet. Finance leases are property and equipment, other current liabilities, and other non-current liabilities in the balance sheet.
ROU assets represent the right to use an asset for the lease term and lease liability represent the obligation to make lease payment arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over lease term. As most of the leases doesn’t provide an implicit rate. We generally use the incremental borrowing rate on the estimated rate of interest for collateralized borrowing over a similar term of the lease
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payments at commencement date. The operating ROU asset also includes any lease payments made and exclude lease incentives. Lease expense for lease payment is recognized on a straight-line basis over lease term.
Since June 28, 2018 (Inception), the only lease arrangement we have entered into is a month-to-month lease for a storage unit. This lease has a term of less than 12 months, so we have elected to adopt the exemption for short-term leases and have not accounted for it as described above.
Income Taxes:
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Uncertain Tax Positions:
We evaluate tax positions in a two-step process. We first determine whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We classify gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as long-term liabilities in the financial statements.
Revenue Recognition:
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
Step 1: Identify the contract(s) with customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when the entity satisfies a performance obligation
Service revenues are recognized as the services are performed in proportion to the transfer of control to the customer and real estate revenues are recognized at the time of sale when consideration has been exchanged and title has been conveyed to the buyer. At this time, we have not identified specific planned revenue streams.
During the nine-month periods ended September 30, 2020 and 2019, we did not recognize any revenue.
Advertising Costs:
We expense advertising costs when advertisements occur. No advertising costs were incurred during the nine-month periods ended September 30, 2020 and 2019.
Stock-Based Compensation:
The cost of equity instruments issued to non-employees in return for goods and services is measured by the fair value of the equity instruments issued in accordance with ASC 718, “Compensation - Stock Compensation.” Measurement date for non-employees is the grant date of the stock-based compensation. The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued.
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Net Loss per Share Calculation:
Basic earnings (loss) per common share ("EPS") is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
No potentially dilutive debt or equity instruments were issued or outstanding during the nine-month periods ended September 30, 2020 and 2019.
Recently Accounting Pronouncements:
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and do not believe any of these pronouncements will have a material impact on our financial statements.
NOTE 4. PREPAID EXPENSES
As of September 30, 2020 and December 31, 2019, the balance of prepayments and deposits was $4,875 and $0, respectively, which related to the annual disclosure and news service subscription for OTC Markets which is being amortized monthly over the course of the year commencing July 1, 2020.
NOTE 5. ACCRUED EXPENSES - RELATED PARTIES
As of September 30, 2020 and December 31, 2019, balances of $142,000 and $90,000, respectively, in accrued compensation were due to our current officers and directors. Further, $12,630 and $5,373, respectively, in accrued interest was accrued in respect of the loan made to us by a partnership controlled by one of our directors and officers who is also our principal shareholder (Note 6).
NOTE 6. NOTE PAYABLE – RELATED PARTY
During the nine-month periods ended September 30, 2020 and 2019, a partnership controlled by one of our directors and officers, who is also our principal shareholder, advanced to us $47,733 and $49,858, respectively, by way of a promissory note to finance our working capital requirements.
The promissory note is unsecured, due on demand and bears interest at 8% per annum.
As of September 30, 2020 and December 31, 2019, the balance outstanding under the promissory note was $143,710 and $95,977, respectively.
As further discussed on Note 9 Subsequent Events below, effective October 28, 2020, under the terms of a Securities Purchase Agreement between Mr. Richard Dean, our current principal shareholder, director and Chief Executive Officer, his wife Reagan Dean and Willamette Group Trust (“WGT), a trust controlled by Mr. Peter Gonzalez, our President, director and Chief Financial Officer, the promissory note is to be repaid in full effective on or before March 31, 2021 and Mr. Gonzalez entered into a personal guarantee for repayment of the promissory note
NOTE 7. COMMITMENTS & CONTINGENCIES
Legal Proceedings
We were not subject to any legal proceedings during the nine-month periods ended September 30, 2020 or 2019, and, to the best of our knowledge, no legal proceedings are pending or threatened.
Contractual Obligations
We rent a storage unit under a month to month agreement. We initially were paying $120 per month, but in April we downsized our unit and now only pay $87 per month.
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Effective October 1, 2018, we entered into three-year employment agreements with two of our directors and officers. Each individual is entitled to a salary of $36,000 per year and bonuses and stock options to be determined and issued at a later date.
As further discussed in Note 9. Subsequent Events below, effective October 1, 2020, we mutually agreed with Mr. Dean, our principal shareholder, a director and our Chief Executive Officer, that no further accrual for compensation would be made in respect of his employment contract.
NOTE 8. SHAREHOLDERS’ DEFICIT
Preferred Stock
As of September 30, 2020 and December 31, 2019, we were authorized to issue 9,000,000 shares of preferred stock with a par value of $0.0001.
Series A Preferred Stock
Effective January 17, 2019, we issued 1,000,000 shares of Series A Preferred Stock, valued by an independent third-party valuation firm using a market approach at $85,500, to one of our directors and officers who is also our principal shareholder, for cash consideration of $10,000 and services rendered of $75,500.
The shares of Series A Preferred Stock carry super majority voting rights such that they can vote the equivalent of 60% of common stock at all times. The shares of Series A Preferred Stock have no dividend rights or liquidation preferences over our common stock.
As of September 30, 2020 and December 31, 2019, 1,000,000 shares of Series A Preferred Stock were issued and outstanding.
Apart from Series A Preferred Stock described above, no other series of preferred stock had been designated or issued at September 30, 2020.
Common Stock
The Company is authorized to issue 25,000,000 shares of common stock with a par value of $0.0001.
As of September 30, 2020 and December 31, 2019, 21,525,481 shares of common stock were issued and outstanding.
Stock Options
We have an incentive stock option plan, which provides for the granting by the Board of Directors of stock options to directors and officers for the purchase of authorized but unissued common shares. No stock options have been granted under this plan since its inception.
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events after September 30, 2020, in accordance with FASB ASC 855 Subsequent Events, through the date of the issuance of these financial statements and has determined there have been no subsequent events for which disclosure is required other than as disclosed below:
Amendment to Mr. Dean’s Employment Agreement
Effective October 1, 2020, we mutually agreed with Mr. Dean, our principal shareholder, a director and our Chief Executive Officer, that no further accrual for compensation would be made in respect of his employment contract.
Securities Purchase Agreement
Effective October 28, 2020, our current principal shareholder, director and Chief Executive Officer, Mr. Richard Dean, together with his wife Reagan Dean (together the “Seller”) entered into an agreement to sell 7,988,601 shares of the Company’s common
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stock and 1,000,000 shares of the Company’s preferred stock to Willamette Group Trust (“WGT), a trust controlled by Mr. Peter Gonzalez, our President, director and Chief Financial Officer, for a purchase consideration of $150,000.
The purchase consideration will comprise a cash payment of $75,000 to be made by January 15, 2021 and a secured promissory note, bearing interest at 8%, for the balance of $75,000 to be paid by March 31, 2021.The shares in question will be delivered to WGT concurrent with the delivery of the initial cash purchase price of $75,000 described above.
Further under this agreement, the current outstanding loan of approximately $143,000 due to a partnership controlled by the Seller is to be repaid in full on or before March 31, 2020 and Mr. Gonzalez entered into a personal guarantee for repayment of the promissory note
Mr. Richard Dean will retain ownership of 1,000,000 shares of the Company’s common stock.
Staff Appointments and Equity Compensation
The Company has entered into the following agreements that commence effective December 1, 2020:
Mr. Gonzalez, one of our directors, our President and Chief Financial Officer, will be issued 60,000 shares of common stock as compensation.
Mr. John Page and Ms. Mary Helen Cobb will be appointed as officers of the Company.
Mr. Page will receive as compensation an initial issuance of 120,000 shares of our common stock, followed by further annual compensation of 120,000 share of our common stock issued on a semi-annual basis in arrears.
Ms. Cobb will receive as compensation an initial issuance of 60,000 shares of our common stock, followed by a further annual compensation of 60,000 share of our common stock issued on a semi-annual basis in arrears.
A further 4 individuals have been retained as consultants to the Company in various capacities The total combined compensation for all 4 individuals will be an initial issuance of 168,000 shares of our common stock, followed by a further annual compensation of 144,000 share of our common stock issued on a semi-annual basis in arrears.
Additionally, a further 4 individuals have been retained as consultants to the Company in various capacities and will each receive issuances totaling 66,000 shares of our common stock as compensation.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements and Associated Risks.
This Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” or “continue,” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. As reflected in the accompanying financial statements, as of September 30, 2020, we had an accumulated deficit totaling $290,407. This raises substantial doubts about our ability to continue as a going concern.
Plan of Operation
Our plan of operations is to raise debt and/or equity to meet our ongoing operating expenses with opportunities for growth in return for shares of our common stock to create value for our shareholders. There can be no assurance that we will successfully complete this series of transactions. In particular, there is no assurance that any stockholder will realize any return on their shares after such a transaction. Any merger or acquisition completed by us can be expected to have a significant dilutive effect on the percentage of shares held by our current stockholders.
We believe we are an insignificant participant among the firms which engage in the acquisition of business opportunities. There are many established venture capital and financial concerns that have significantly greater financial and personnel resources and technical expertise than we have. In view of our limited financial resources and limited management availability, we will continue to be at a significant competitive disadvantage compared to our competitors.
We intend to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to us by persons or firms which desire to seek the advantages of an issuer who has complied with the Securities Act of 1934 (the “1934 Act”). We will not restrict our search to any specific business, industry or geographical location, and we may participate in business ventures of virtually any nature. This discussion of our proposed business is purposefully general and is not meant to be restrictive of our virtually unlimited discretion to search for and enter into potential real estate development and construction opportunities. We anticipate that we may be able to participate in only a few projects initially because of our lack of financial resources.
We may seek a business opportunity with entities which have recently commenced operations, or that desire to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly owned subsidiaries in various businesses or acquire existing businesses as subsidiaries.
We expect that the selection of a business opportunity will be complex and risky. Due to general economic conditions, rapid technological advances being made in some industries and shortages of available capital, we believe that there are numerous firms seeking the benefits of an issuer who has complied with the 1934 Act. Such benefits may include facilitating or improving the terms on which additional equity financing may be sought, providing liquidity for incentive stock options or similar benefits to key employees, providing liquidity (subject to restrictions of applicable statutes) for all stockholders and other factors. Potentially, available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. We have, and will continue to have, essentially no assets to provide the owners of business opportunities. However, we will be able to offer owners of acquisition candidates the opportunity to acquire a controlling ownership interest in an issuer who has complied with the 1934 Act without incurring the cost and time required to conduct an initial public offering.
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The analysis of new business opportunities will be undertaken by, or under the supervision of, our directors. We intend to concentrate on identifying preliminary prospective business opportunities which may be brought to our attention through present associations of our director, professional advisors or by our stockholders. In analyzing prospective business opportunities, we will consider such matters as (i) available technical, financial and managerial resources; (ii) working capital and other financial requirements; (iii) history of operations, if any, and prospects for the future; (iv) nature of present and expected competition; (v) quality, experience and depth of management services; (vi) potential for further research, development or exploration; (vii) specific risk factors not now foreseeable but that may be anticipated to impact the proposed activities of the company; (viii) potential for growth or expansion; (ix) potential for profit; (x) public recognition and acceptance of products, services or trades; (xi) name identification; and (xii) other factors that we consider relevant. As part of our investigation of the business opportunity, we expect to meet personally with management and key personnel. To the extent possible, we intend to utilize written reports and personal investigation to evaluate the above factors.
We will not acquire or merge with any company for which audited financial statements cannot be obtained within a reasonable period of time after closing of the proposed transaction.
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2019
We are a publicly quoted real estate development company seeking to develop or redevelop residential, commercial or mixed-use properties
Revenue
We recognized no revenue during the three-month periods ended September 30, 2020 and 2019 as we had no revenue generating activities during these periods.
General and Administrative Expenses
During the three months ended September 30, 2020, we incurred general and administrative expenses of $30,106 compared to $38,493 during the same period ended September 30, 2019, a decrease of $8,387. The decrease was primarily due to the fact that during the three months ended September 30, 2019 we incurred $6,759 more in professional fees and $1,628 more in office fees than during the three months ended September 30, 2020.These additional costs were incurred in respect of the Company’s efforts to become a fully reporting SEC company.
Operating Loss
During the three months ended September 30, 2020, we incurred an operating loss of $30,106 compared to an operating loss of $38,493 during the three months ended September 30, 2019 due to the factors described above.
Interest and Other Income (Expenses)
During the three months ended September 30, 2020, we incurred $2,836 in related party interest expense compared to $1,412 for the same period ended September 30, 2019, an increase of $1,424.The increase arose due to the increase in the balance of the loan outstanding with the related party from $80,215 as of September 30, 2019 to $143,710 as of September 30, 2020.
Loss before Income Tax
During the three months ended September 30, 2020, we incurred a net loss before income taxes of $32,942 compared to $39,905 for the three months ended September 30, 2019 due to the factors discussed above.
Provision for Income Tax
No provision for income taxes was recorded during the three months ended September 30, 2020 or 2019 as we incurred taxable losses in both periods.
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Net Loss
During the three months ended September 30, 2020, we incurred a net loss of $32,942 compared to a net loss of $39,905 in 2019 due to the factors discussed above.
RESULTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2019
We are a publicly quoted real estate development company seeking to develop or redevelop residential, commercial or mixed-use properties
Revenue
We recognized no revenue during the nine-month periods ended September 30, 2020 and 2019 as we had no revenue generating activities during these periods.
General and Administrative Expenses
During the nine months ended September 30, 2020, we incurred general and administrative expenses of $98,274 compared to $192,257 during the same period ended September 30, 2019, a decrease of $93,983. The decrease was primarily due to the fact that during the nine months ended September 30, 2019 we issued 883,041 shares of Series A Preferred Stock, valued at $75,500, as compensation to one of our directors and officers who is also our principal shareholder. No such compensation was issued during the nine months ended September 30, 2020. The balance of the decrease of $18,483 related to reductions of $13,565 in professional fees, $2,467 in office expenses and $2,451 in travel coats that were incurred in the nine months ended September 30, 2019 in respect of the Company’s efforts to become a fully reporting SEC company.
Operating Loss
During the nine months ended September 30, 2020, we incurred an operating loss of $98,274 compared to an operating loss of $192,257 during the nine months ended September 30, 2019 due to the factors described above.
Interest and Other Income (Expenses)
During the nine months ended September 30, 2020, we incurred $7,256 in related party interest expense compared to $3,026 for the same period ended September 30, 2019, an increase of $4,230. The increase arose due to the increase in the balance of the loan outstanding with the related party from $80,215 as of September 30, 2019 to $143,710 as of September 30, 2020.
Loss before Income Tax
During the nine months ended September 30, 2020, we incurred a net loss before income taxes of $105,530 compared to $195,283 for the nine months ended September 30, 2019 due to the factors discussed above.
Provision for Income Tax
No provision for income taxes was recorded during the nine months ended September 30, 2020 or 2019 as we incurred taxable losses in both periods.
Net Loss
During the nine months ended September 30, 2020, we incurred a net loss of $105,530 compared to $195,283 for the nine months ended September 30, 2019 due to the factors discussed above.
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LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2020, we did not have any revenue generating activities or other sources of income and we had working capital deficit of $297,333 and an accumulated deficit of $290,407.
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2020 | September 30, 2019 | |||||||
| Net Cash Used in Operating Activities | $ | (47,621 | ) | $ | (57,091 | ) | ||
| Net Cash Flows from Investing Activities | — | — | ||||||
| Net Cash Flows from Financing Activities | 47,733 | 59,458 | ||||||
| Net Movement in Cash and Cash Equivalents | $ | 112 | $ | 2,367 | ||||
Operating Activities
During the nine months ended September 30, 2020, we incurred a net loss of $105,530 which after adjustments for an increase in prepaid expenses of $4,875, an increase in accounts payable of $1,527 and an increase in accrued expenses – related parties of $61,257, resulted in net cash of $47,621 being used in operations.
By comparison, during the same period ended September 30, 2019, we incurred a net loss of $195,283 which after adjustments for $75,500 in stock-based compensation, an increase in accounts payable of $5,665 and an increase in accrued expenses – related parties of $57,027 resulted in net cash of $57,091 being used in operations.
Investing Activities
During the nine months period ended September 30, 2020 and 2019, we had no investing activities.
Financing Activities
During the nine months ended September 30, 2020, we received $47,733 by way of loan from one of our directors and officers who is also our principal shareholder resulting in net cash flow from financing activities of $47,733.
By comparison, during the nine months ended September 30, 2019, we received $49,858 by way of loan from one of our directors and officers who is also our principal shareholder, $10,000 from the sale of preferred stock and paid off our $400 overdrawn bank account resulting in a total of $59,458 generated from financing activities.
We are dependent upon the receipt of capital investment or other financing to fund our ongoing operations and to execute our business plan to become a profitable real estate development company seeking to develop or redevelop residential, commercial or mixed used properties. In addition, we are dependent upon our controlling shareholder to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our plan of operations.
CRITICAL ACCOUNTING POLICIES
All companies are required to include a discussion of critical accounting policies and estimates used in the preparation of their financial statements. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Note 3 of our Financial Statements on page 8. These policies were selected because they represent the more significant accounting policies and methods that are broadly applied in the preparation of our financial statements.
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Inflation
In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future.
Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Off-Balance Sheet Arrangements
Per SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. As of September 30, 2020, we have no off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and do not believe any of these pronouncements will have a material impact on our financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer/principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
Management has carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures and determined that they are ineffective. Due to the lack of personnel and outside directors, management acknowledges that there are deficiencies in these controls and procedures. The Company anticipates that with further resources, the Company will expand both management and the board of directors with additional officers and independent directors in order to provide sufficient disclosure controls and procedures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II - OTHER INFORMATION
We were not subject to any legal proceedings during the nine-month periods ended September 30, 2020 or 2019, and, to the best
of our knowledge, no legal proceedings are pending or threatened.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not Applicable.
Changes in Control of Registrant:
On October 28, 2020, Mr. Richard Dean and his wife Reagan Dean entered into a Securities Purchase Agreement with Willamette Group Trust, of which Mr. Pedro Gonzalez is Trustee, and agreed to sell a majority of their shares (5,971,330 and 2,017,271 common shares owned by Richard Dean and Reagan Dean, respectively, and 675,000 and 325,000 preferred shares owned by Richard Dean and Reagan Dean, respectively) to Willamette Group Trust. Pursuant to the agreement, Mr. Dean will retain 1,000,000 common shares of Stratus Capital Corp. (the “Company”). Additionally, Mr. Gonzalez agreed to personally guarantee the existing promissory note between the Deans and the Company, with an anticipated repayment date of March 31, 2021.
As a result of the transaction, Mr. Dean holds 1,000,000 shares of common stock (4.65%) and zero shares of preferred stock; Willamette Group Trust holds 8,110,146 shares of common stock (37.68%) and 1,000,000 shares of preferred stock (100%); Mr. Gonzalez holds 2,836,984 shares of common stock (13.18%) and zero shares of preferred stock (0%) and beneficially owns 10,947,130 shares of common stock (50.86%) and 1,000,000 shares of preferred stock (100%) with the Willamette Group Trust holdings included. Willamette Group Trust acquired the shares for $75,000 in cash, due January 15, 2021 and $75,000 in an 8% secured promissory note due March 31, 2021, with the securities pledged as collateral. As additional consideration, Mr. Gonzalez agreed to personally guarantee the existing promissory note between the Deans and the Company, with an anticipated repayment date of March 31, 2021.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers:
On October 25, 2020, Mr. Richard Dean resigned as Chief Executive Officer, President and Chairman of the Board, effective immediately. He remains a Director and will continue serving in that position. Concurrently, the Board of Directors of the Company appointed Mr. Pedro C. Gonzalez as the Company's Chief Executive Officer, President and Chairman of the Board. Mr. Gonzalez currently serves as the Company's Chief Financial Officer and Secretary and will continue serving in those positions.
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The Company has appointed Mary Helen Cobb and John L. Page as Executive Vice-Presidents and officers of the Company effective December 1, 2020. The Company will report biographical information at the time of hiring. Mr. Gonzalez, Ms. Cobb, and Mr. Page will be eligible for the Company stock option program, which is authorized but yet to be defined. In addition to an annual base salary yet to be determined, for services provided, Mr. Gonzalez will receive annual stock compensation of 60,000 shares of common stock, Ms. Cobb will receive annual stock compensation of 30,000 shares of common stock and a one-time stock compensation of 30,000 shares of common stock, and Mr. Page will receive annual stock compensation of 60,000 shares of common stock and a one-time stock compensation of 60,000 shares of common stock.
Exhibits. The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.
| 31.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a–14(a) or 15d-14(a) of the Securities Exchange Act of 1934 |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | XBRL Instance Document (1) |
| 101.SCH | XBRL Taxonomy Extension Schema Document (1) |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (1) |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (1) |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document (1) |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (1) |
| (1) | Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
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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.
| STRATUS CAPITAL CORP. | ||
| (Registrant) | ||
| Dated: November 16, 2020 | By: | /s/ Pedro C. Gonzalez |
| Pedro C. Gonzalez | ||
| (Chief Executive Officer, Chief Financial Officer, Principal Executive Officer and Principal Accounting Officer) | ||
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