Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - Renewable Energy Acquisition Corp. | reac0013_ex32-1.htm |
| EX-31.1 - EXHIBIT 31.1 - Renewable Energy Acquisition Corp. | reac0013_ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark one)
| x | Annual Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2020
| ¨ | Transition Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 |
For the transition period from ______________ to _____________
Commission File Number: 0-53900
Renewable Energy Acquisition Corp.
(Exact name of registrant as specified in its charter)
| Nevada | 74-3219044 | |
| (State of incorporation) | (IRS Employer ID Number) |
2694 Blackwater Rd. NW, Longville, MN 56655
(Address of principal executive offices)
(952) 541-1155
(Issuer's telephone number)
Securities registered pursuant to Section 12 (b) of the Act - None
Securities registered pursuant to Section 12(g) of the Act: - Common Stock - $0.0001 par value
Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ¨ No x
Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period the Company 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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 ¨ | Smaller reporting company x |
| Emerging growth company ¨ |
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 by pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes ¨ No 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 ¨
The aggregate market value of voting and non-voting common equity held by non-affiliates as of June 30, 2019 was approximately $-0- based upon -0- shares held by non-affiliates and no trading market.
As of March 31, 2021, there were 700,000 shares of common stock issued and outstanding.
Renewable Energy Acquisition Corp.
Form 10-K for the Year Ended December 31, 2020
Index to Contents
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Caution Regarding Forward-Looking Information
Certain statements contained in this annual filing, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-K and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
General
Renewable Energy Acquisition Corp. (hereinafter referred to as "we", "us", "our", or the "Company") was incorporated in the State of Nevada on June 21, 2007. Since inception, we have been engaged in organizational efforts, and have not generated any revenue to date. We were formed as a vehicle to pursue a merger, capital stock exchange, asset acquisition, or other similar business combination with an operating business in one or more of the renewable energy, energy conservation, energy efficiency, or the environmental industries and their related infrastructures.
We are focused on acquiring a business in one or more of the renewable energy, energy conservation, energy efficiency, or the environmental industries. We have considered a number of specific business combinations but none has reached the point of entering into a binding agreement. We have been approached by candidates (or representative of any candidates) with respect to possible acquisition transactions with our company, but, again, no binding agreements have been entered into with any candidates. We have not engaged or retained any agent or other representative to identify or locate any suitable acquisition candidate for us.
On November 13, 2020, pursuant to a Standstill Agreement dated October 30, 2020 ("the Agreement"), the Company received a $5,000 standstill fee from Florida Intellectual Properties, LLC ("FIP"). Pursuant to the terms of the Agreement, the Company agreed to negotiate in good faith to enter into a business combination agreement with FIP, and to not consider or negotiate other similar transactions so long as the Agreement remains in effect. The Agreement does not obligate either party to consummate a transaction, and until a definitive agreement is reached, or until the Agreement is cancelled by either party, FIP agreed to pay an additional $5,000 standstill fee on the first of each successive month while the agreement is in effect. As of March 31 2021 a definitive agreement has not consummated.
The Company is dependent on its sole officer/director and primary shareholder to fund the reporting and other expenses of the Company.
Renewable Energy Industry and Its Related Infrastructure
The renewable energy industry and its related infrastructure generally includes the production, generation, transmission and distribution of electricity, heat, fuel and other consumable forms of energy through the utilization of renewable fuel sources such as geothermal, biofuels, synfuels, wind, ocean waves, "clean coal," and waste stream pyrolysis (to mention a few); and the infrastructure needed to maintain and operate the facilities, services and installations used in the foregoing areas. Although we may consider a target business in any segment of the renewable energy industry, we currently intend to concentrate our search for an acquisition candidate on companies in the following segments:
| · | Wind electric generation, distribution and transmission; |
| · | Solar power; |
| · | Co-generation; |
| · | Bio-mass; |
| · | Synthetic gas production, distribution and transmission; |
| · | Energy efficiency and energy conservation related products and services; |
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| · | Alternative transportation technologies; |
| · | Steam generation and distribution; |
| · | Alternative transportation technologies; |
| · | Energy storage technologies; |
| · | Other alternative and renewable energy technologies; and |
| · | The development, installation or manufacturing of any of the above. |
Development Plan
Based on our proposed business activities, we are a "blank check" company. The U.S. Securities and Exchange Commission (the "SEC") defines "blank check" companies as,
any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies.
We also qualify as a "shell company," as defined under Rule 12b-2 adopted by the SEC pursuant to the Exchange Act, because we have no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of blank check companies in their respective jurisdictions.
Management does not intend to undertake any effort to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. We intend to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements. We were organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the advantages of being a reporting company. After the consummation of a business combination with an operating company, the surviving company will continue to be subject to the reporting requirements of the Exchange Act, which may be advantageous when establishing a public market. Furthermore, being a reporting company is required in order to seek a listing on a national exchange.
We have a nominal amount of capital and will depend on our directors to provide us with the necessary funds to implement our business plan. We intend to seek opportunities demonstrating the potential of long-term growth as opposed to short-term earnings. However, at the present time, we have not identified any business opportunity that we plan to pursue, nor have we reached any agreement or definitive understanding with any person concerning an acquisition or merger. The analysis of new business opportunities will be undertaken by or under the supervision of our officers and directors. Our officers and directors will collectively devote approximately five hours per week to searching for a target company until an acquisition candidate is identified and a transaction closed.
We believe that business opportunities may come to our attention from various sources, including, professional advisors such as attorneys, and accountants, securities broker-dealers, venture capitalists, members of the financial community and others who may present unsolicited proposals. We have no plan, understanding, agreements, or commitments with any individual for such person to act as a finder of opportunities for us. We can give no assurances that we will be successful in finding or acquiring a desirable business opportunity, given the limited funds that are expected to be available to us for implementation of our business plan. Furthermore, we can give no assurances that any acquisition, if it occurs, will be on terms that are favorable to us or our current stockholders. Discussions have been held from time to time with potential business combination candidates, and the Company has been paid standstill fees in connection with Letters of Intent that were entered into regarding potential business combinations. However, as of this date, no Letter of Intent has resulted in any definitive agreement being entered into with any party. We have flexibility in seeking, analyzing and participating in potential business opportunities. In our effort to analyze potential acquisition targets, we will consider the following kinds of factors:
| · | Potential for growth, indicated by new technology, anticipated market expansion or new products; |
| · | Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole; |
| · | Strength and diversity of management, either in place or scheduled for recruitment; |
| · | Capital requirements and anticipated availability of required funds, to be provided from operations, through the sale of additional securities, through joint ventures or similar arrangements, or from other sources; |
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| · | The cost of participation by us as compared to the perceived tangible and intangible values and potentials; |
| · | The extent to which the business opportunity can be advanced; |
| · | The accessibility of required management expertise, personnel, raw materials, services, professional assistance, and other required items; and |
| · | Other relevant factors. |
In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which may make the task of comparative investigation and analysis of such business opportunities difficult and complex. Due to our limited capital available for investigation, we may not discover or be able to fully investigate potential adverse factors concerning the opportunity to be acquired.
Form of Acquisition
The manner in which we participate in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of us and the promoters of the opportunity, and the relative negotiating strength of us and such promoters. It is likely that we will acquire our participation in a business opportunity through the issuance of our common stock or other securities. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other tax free transaction provisions under the Code, all prior stockholders would retain 20% or less of the total issued and outstanding shares of the surviving entity. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who are stockholders prior to the acquisition. Our present stockholders will likely not have control of our majority voting securities following an acquisition transaction. However, our present stockholders will benefit from such a transaction by retaining an equity interest in the surviving company, a cash payment in exchange for outstanding shares, or a combination of both cash and equity. As part of such a transaction, our present directors or officers may resign and one or more new directors or officers may be appointed in connection with the transaction.
In the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving us, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding securities. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval. It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation might not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to us of the related costs incurred.
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Employees
The Company currently has no employees. Management of the Company expects to use consultants, attorneys and accountants as necessary, and does not anticipate a need to engage any full-time employees so long as it is seeking and evaluating business opportunities. The need for employees and their availability will be addressed in connection with the decision whether or not to acquire or participate in specific business opportunities.
Where You Can Find Information
We are required to file with the Securities and Exchange Commission (“SEC”) annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports of certain events on Form 8-K, and proxy and information statements disseminated to stockholders in connection with meetings of stockholders and other stockholder actions. The Company does not maintain an internet website. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the reports filed by the Company. The address of that site is http://www.sec.gov\.
The COVID-19 outbreak may adversely impact our ability to implement our business plan
As a shell company, we have no specific business plan or purpose other than to merge with an unidentified company or companies. The outbreak of the coronavirus (COVID-19) has resulted in travel restrictions, the shutdown of businesses, quarantines, market downturns, and other mandatory and voluntary changes in behavior related to the pandemic. Reverse merger transactions involving shell companies often involve a contemporaneous funding event. The resulting impacts of the COVID-19 outbreak mentioned above may adversely impact our ability to find a willing merger partner in the near future. If we are able to attract a merger partner, our ability to conduct proper due diligence may be hindered, and finally, if we do enter into an agreement with at suitable target, we may not be able to find investors willing to fund the transaction. The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain.
Item 1B - Unresolved Staff Comments
None
The Company currently maintains a mailing address at 2694 Blackwater Rd. NW, Longville, MN 56655. The Company’s telephone number there is (952) 541-1155. Other than this mailing address, the Company does not currently maintain any other office facilities, and does not anticipate the need for maintaining office facilities at any time in the foreseeable future. The Company pays no rent or other fees for the use of the mailing address as it is the primary residence of the Company’s executive officer and director.
It is likely that the Company will not establish an office until it has completed a business acquisition transaction, but it is not possible to predict what arrangements will actually be made with respect to future office facilities.
The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.
Item 4 - Mine Safety Disclosures
Not applicable to the Company.
Item 5 - Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Trading and Eligibility for Future Sale
Our common stock is not trading on any stock exchange or over-the-counter. We are not aware of any market activity in our common stock since its inception through the date of this filing.
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Holders
As of March 31, 2021, there were four stockholders of record, who owned all of the 700,000 shares of our common stock issued and outstanding.
Transfer Agent
The Company operates as its own transfer agent.
Dividends
We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
Securities Authorized for Issuance Under Equity Compensation Plans
We do not have compensation plans under which equity securities are authorized for issuance to any person.
Item 6 - Selected Financial Data
Not applicable
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Caution Regarding Forward-Looking Information
Certain statements contained in this annual filing, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-K and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
General
Renewable Energy Acquisition Corp. was incorporated on June 21, 2007 under the laws of the State of Nevada to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business in either the renewable energy or the environmental industry and their related infrastructures. As we have not had substantial operations or substantial assets since inception, the Company is considered in the development stage.
On November 13, 2020, pursuant to a Standstill Agreement dated October 30, 2020 ("the Agreement"), the Company received a $5,000 standstill fee from Florida Intellectual Properties, LLC ("FIP"). Pursuant to the terms of the Agreement, the Company agreed to negotiate in good faith to enter into a business combination agreement with FIP, and to not consider or negotiate other similar transactions so long as the Agreement remains in effect. The Agreement does not obligate either party to consummate a transaction, and until a definitive agreement is reached, or until the Agreement is cancelled by either party, FIP agreed to pay an additional $5,000 standstill fee on the first of each successive month while the agreement is in effect.
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Results of Operations
The Company had no revenue for the years ended December 31, 2020 and 2019, respectively.
Operating expenses of $18,303, and $22,033 for the years ended December 31, 2020 and 2019, respectively, were directly related to maintaining the corporate entity, investigating opportunities pursuant to the Company’s business plan and continued compliance with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended. For the year ended December 31, 2020 the Company received and recorded $10,000 as Income-Standstill Payments as an offset to operating expenses as the funds must be used for expenses incurred in the ordinary course of business.
Other expenses of $6,845 and $3,735 for the years ended December 31, 2020 and 2019, respectively, were due to interest expense on related party note payables and short-term advances.
The Company may or may not experience increases in expenses in future periods as the Company explores various options for the implementation of its business plan. However, at this time, the Company has not executed or consummated any definitive agreements with any identified business combination target. Further, it is anticipated that future expenditure levels may increase as the Company intends to fully comply with its periodic reporting requirements.
The Company does not expect to generate any meaningful revenue or incur operating expenses for purposes other than fulfilling the obligations of a reporting company under the Securities Exchange Act of 1934 unless and until such time that the Company acquires or participates in a business with revenue producing activities.
Loss per share for the years ended December 31, 2020 and 2019 were $(0.04), and $(0.04), respectively, based on the weighted-average shares issued and outstanding at the end of each such period.
Plan of Business
Our development plan, form of acquisition and a discussion of the renewable energy industry and its related infrastructure is more fully discussed in Part 1, Item 1 of this filing.
Liquidity and Capital Resources
Our cash used in operating activities for the year ended December 31, 2020 was $13,489 that primarily reflects our net loss of $25,148, change in accounts payable of $7,536, and change in interest payable of $4,123, compared to $9,584 for the year ended December 31, 2019, that mainly reflects our net loss of $25,768, change in accounts payable of $11,533, and change in interest payable of $2,963.
Our cash provided by financing activities for the year ended December 31, 2020 was $20,650, compared to $7,950 for the year ended December 31, 2019. For the year ended December 31, 2020, the Company and received proceeds from notes payable from a stockholder of $8,150 as well as notes payable of $12,500 compared to repayment of short-term advances of $5,000 which were off by notes payable of $3,150 and cash received from notes payable to stockholders of $9,800 for the year ended December 31, 2019.
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At December 31, 2020 and 2019, the Company had working capital deficit of approximately $(165,000) and $(140,000), respectively; inclusive of short term loans of $12,000 and $12,000 respectively at December 31, 2020 and 2019, notes payable of $15,650 and $3,150 at December 31, 2020 and 2019, respectively, and stockholder debt of approximately $83,619 and $75,469, respectively, at December 31, 2020 and 2019.
It is the belief of management and significant stockholders that they will provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, there is no legal obligation for either management or significant stockholders to provide additional future funding. Further, the Company is at the mercy of future economic trends and business operations for the Company’s majority stockholder to have the resources available to support the Company. Should this pledge fail to provide financing, the Company has not identified any alternative sources. Consequently, there is substantial doubt about the Company's ability to continue as a going concern. The Company estimates it cash requirement for the next 12 months to be approximately $30,000.
The Company's need for working capital may change dramatically as a result of any business acquisition or combination transaction. There can be no assurance that the Company will identify any such business, product, technology or company suitable for acquisition in the future. Further, there can be no assurance that the Company would be successful in consummating any acquisition on favorable terms or that it will be able to profitably manage the business, product, technology or company it acquires.
The Company has no current plans, proposals, arrangements or understandings with respect to the sale or issuance of additional securities prior to the location of a merger or acquisition candidate. Accordingly, there can be no assurance that sufficient funds will be available to the Company to allow it to cover the expenses related to such activities.
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Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note D of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.
Item 7A - Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 8 - Financial Statements and Supplementary Data
The required financial statements begin on page F-1 of this document.
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A - Controls and Procedures
Disclosure Controls and Procedures. Our management, under the supervision and with the participation of our Chief Executive and Financial Officer (Certifying Officer), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 promulgated under the Exchange Act as of the end of the period covered by this Annual Report. Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Certifying Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Certifying Officer concluded that as of such date, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the time periods specified by the SEC due to a weakness in our controls described below. However, our Certifying Officer believes that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the respective periods presented.
Management’s Annual Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act.
Internal control over financial reporting is defined under the Exchange Act as a process designed by, or under the supervision of, our CEO and CFO and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
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| · | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
| · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Accordingly, even an effective system of internal control over financial reporting will provide only reasonable assurance with respect to financial statement preparation.
Management's assessment of the effectiveness of the Company's internal control over financial reporting as of the year ended December 31, 2020 has determined that we are currently considered to be a shell company in as much as we have no specific business plans, no operations, revenues or employees. Because we have only one executive operating officer, the Company's internal controls are deficient for the following reasons, (1) there are no entity level controls because there is only one person serving in the dual capacity of Chief Executive Officer and Chief Financial Officer, (2) there are no segregation of duties as that same person approves, enters, and pays the Company's bills, and (3) there is no separate audit committee. As a result, the Company's internal controls have an inherent weakness, which may increase the risks of errors in financial reporting under current operations and accordingly are deficient as evaluated against the criteria set forth in the Internal Control - Integrated Framework issued by the committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal controls over financial reporting were not effective as of December 31, 2020.
This Annual Report does not include an attestation report of our registered public accounting firm regarding our internal control over financial reporting because it is not required under applicable regulations.
Changes in Internal Control over Financial Reporting.
There was no change in our internal control over financial reporting that occurred during the year ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting which internal controls will remain deficient until such time as the Company completes a merger transaction or acquisition of an operating business at which time management will be able to implement effective controls and procedures.
Not applicable.
Item 10 - Directors, Executive Officers and Corporate Governance
The directors and executive officers serving the Company are as follows:
| Name | Age | Position Held and Tenure | ||
| Craig S. Laughlin | 71 | President, Chief Executive Officer | ||
| Chief Financial Officer and Director |
Our director serves for a term beginning with election and ending with resignation, removal by the stockholders, or election of a successor by the stockholders. Executive officers serve by appointment at the discretion of the board of directors.
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CRAIG S. LAUGHLIN, PRESIDENT, CHIEF EXECUTIVE OFFICER, AND DIRECTOR.
Mr. Laughlin, a significant stockholder, officer and director, is the founder and President of SRC Funding, LLC, a privately-owned Minnesota company engaged in business consulting services and private investment activity.
Mr. Laughlin served as president and a director, of Vegalab, Inc. (“Vegalab”) (formerly HPC Acquisitions, Inc.), a publicly-owned Nevada corporation until December, 2019. Subsequent to Mr. Laughlin’s resignation, the company surrendered its inventory and other assets to a secured creditor and became inactive. Vegalab, Inc. was engaged in the business of distributing eco-friendly agro-products.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors and person who own more than 10% of our common stock to file reports regarding ownership of and transactions in our securities with the Commission and to provide us with copies of those filings. Based solely on our review of the copies received by or a written representation from certain reporting persons we believe that during fiscal year ended December 31, 2020, we believe that all eligible persons are in compliance with the requirements of Section 16(a).
Code of Ethics
The Company has not adopted a code of ethics. Since the Company has no employees and one person serving as the sole executive and financial officer, as well as being a director, a code of ethics would have no practical benefit due to the lack of any meaningful reporting or accountability process.
Item 11 - Executive Compensation
Executive Officers
No officer or director has received any compensation from us. Until we consummate a business combination, it is not anticipated that any officer or director will receive compensation from us.
We have no stock option, retirement, pension, or profit-sharing programs for the benefit of directors, officers or other employees.
Our board of directors appoints our executive officers to serve at the discretion of the board. Craig S. Laughlin is our sole operating officer and a director. Our directors receive no compensation from us for serving on the board. Until we consummate a business combination, we do not intend to reimburse our officers or directors for travel and other expenses incurred in connection with attending the board meetings or for conducting business activities.
Executive Compensation
Craig S. Laughlin has received no compensation from us nor have we accrued any cash or non-cash compensation for his services since he was elected as an officer and director. The current management and oversight of the Company requires less than four hours per month. In future periods, subsequent to the consummation of a business combination transaction, the Company anticipates that it will pay compensation to its officer(s) and/or director(s).
We do not have any employment or consulting agreements with any parties nor do we have a stock option plan or other equity compensation plans.
| 12 |
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Total ($) | ||||||||
| Craig S. Laughlin, | 2020 | $ | -0- | $ | -0- | ||||||
| Principal Executive Officer | 2019 | $ | -0- | $ | -0- | ||||||
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of the date of this Annual Report, the number of shares of Common Stock owned of record and beneficially by executive officers, directors and persons who hold 5% or more of the outstanding Common Stock of the Company. Also included are the shares held by all executive officers and directors as a group.
| Shares Beneficially Owned | ||||||||
| Name and address | Number of Shares | Percentage (1) | ||||||
| Craig S. Laughlin (2) | 640,000 | 91.4 | % | |||||
| 10935 57th Avenue No. | ||||||||
| Plymouth, Minnesota 55442 | ||||||||
| All Executive officers and Directors as a Group (1 person) | 640,000 | 91.4 | % | |||||
| (1) | On March 31, 2021, there were 700,000 shares of our common stock outstanding and no shares of preferred stock issued and outstanding. We have no outstanding stock options or warrants. |
| (2) | The number of shares held by Mr. Laughlin includes 51,000 shares over which he may be deemed to have shared voting and investment control because they are held by his spouse. |
Item 13 - Certain Relationships and Related Transactions, and Director Independence
Relationships and Transactions
During 2020, Craig Laughlin, an officer and director, advanced to us $8,150 to support the Company’s working capital needs, which is in addition to advances made in prior periods. The total amount of advances at the end of 2019 was $8. These loans are due upon demand and bear interest at 6.0% per annum.
During 2019, Craig Laughlin, an officer and director, advanced to us $9,800 to support the Company’s working capital needs, which is in addition to advances made in prior periods. The total amount of advances at the end of 2019 was $75,469. These loans are due upon demand and bear interest at 6.0% per annum.
During 2018, Craig Laughlin, an officer and director, advanced to us $500 to support the Company’s working capital needs, which is in addition to advances made in prior periods. The total amount of advances at the end of 2018 was $65,669. These loans are due upon demand and bear interest at 6.0% per annum.
During 2017, Craig Laughlin, an officer and director, advanced to us $3,275 to support the Company’s working capital needs, which is in addition to advances made in prior periods. The total amount of advances at the end of 2017 was $65,169. These loans are due upon demand and bear interest at 6.0% per annum
On September 23, 2016, we issued 537,625 shares of common stock to Mr. Laughlin, in consideration for the conversion and cancellation of $5,376.25 of note payment obligations owed by us to Mr. Laughlin.
Director Independence
The Board of Directors has determined that none of its directors is "independent" under the criteria set forth in Rule 5065(a)(2) of the Nasdaq Listing Rules. The board does not have a separately designated audit, nominating, or compensation committee, so the functions normally attributed to these committees are performed by the entire board. Accordingly, none of our directors is "independent" under applicable Nasdaq Listing Rules that define independence for purposes of directors performing the functions of such committees.
| 13 |
Item 14 - Principal Accountant Fees and Services
The Company’s financial statements are audited annually by an independent registered public accounting firm. For the year ended December 31, 2019 and December 31, 2020, the audit was performed by Rosenberg Rich Baker Berman, P.A. (“RRBB”). Fees for professional services provided by the principal accountants for the fiscal years ended December 31, 2020 and 2019, were as follows:
| RRBB | RRBB | |||||||
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| 1. Audit fees | $ | 11,700 | $ | 4,250 | ||||
| 2. Audit-related fees | - | |||||||
| 3. Tax fees | - | |||||||
| 4. All other fees | - | |||||||
| Totals | $ | 11,700 | $ | 4,250 | ||||
We have considered whether the provision of any non-audit services, currently or in the future, is compatible with RRBB maintaining its independence and have determined that these services do not compromise their independence.
Financial Information System Design and Implementation: RRBB did not charge us any fees for financial information system design and implementation fees.
We have no formal audit committee. However, the entire Board of Directors (Board) is the Company's defacto audit committee. In discharging its oversight responsibility as to the audit process, the Board obtained from the independent auditors a formal written statement describing all relationships between us and the auditors that might bear on the auditors' independence as required by the appropriate Professional Standards issued by the Public Company Accounting Oversight Board, the U. S. Securities and Exchange Commission and/or the American Institute of Certified Public Accountants. The Board discussed with the auditors any relationships that may impact their objectivity and independence, including fees for non-audit services, and satisfied itself as to the auditors' independence. The Board also discussed with management, the internal auditors and the independent auditors the quality and adequacy of our internal controls.
The Company’s principal accountant, RRBB, did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees.
| 14 |
Item 15 - Exhibits and Financial Statement Schedules
| 3.1 | Articles of Incorporation (*) |
| 3.1(a) | Certificate of Change filed Pursuant to NRS 78.209 (**) |
| 3.2 | By-Laws (*) |
| 31.1 | Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
| 32.1 | Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T. |
| (*) | Incorporated by reference to the Company’s Registration Statement on Form 10 filed on March 3, 2010. |
| (**) | Incorporated by reference to the Company’s Report on Form 8-K filed September 26, 2016. |
| (***) | Incorporated by reference to the Company’s Report on Form 8-K filed February 19, 2019. |
| (****) | Incorporated by reference to the Company’s Report on Form 8-K filed August 13, 2018. |
(Signatures follow on next page)
| 15 |
Pursuant to the requirements of Section 13 or 15(d) 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.
| Renewable Energy Acquisition Corp. | ||
| Dated: March 31, 2021 | /s/ Craig S. Laughlin | |
| Craig S. Laughlin | ||
| President, Chief Executive Officer | ||
| Chief Financial Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates as indicated.
| Dated: March 31, 2021 | /s/ Craig S. Laughlin | |
| Craig S. Laughlin | ||
| President, Chief Executive Officer | ||
| Chief Financial Officer and Director |
| 16 |
Renewable Energy Acquisition Corp.
Contents
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Renewable Energy Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Renewable Energy Acquisition Corp, (the Company) as of December 31, 2020 and 2019, and the related statements of comprehensive income, stockholders’ equity, and cash Hows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note C to the financial statements, the Company has no operating history, limited cash on hand, no operating assets and has a business plan with inherent risk. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of the financial statements. Management’s evaluation of the events and conditions and management’s plans regarding those matters also are described in Note C. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.
| F-2 |
To the Board of Directors and
Stockholders of Renewable Energy Acquisition Corp.
March 31, 2021
Page 2
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
We have served as the Company’s auditor since 2019.
Somerset, New Jersey
March 31, 2021
| F-3 |
Renewable Energy Acquisition Corp.
Balance Sheets
December 31, 2020 and 2019
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 7,190 | $ | 29 | ||||
| Total Current Assets | $ | 7,190 | $ | 29 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable - trade | $ | 45,705 | $ | 38,169 | ||||
| Short-term advances | 12,000 | 12,000 | ||||||
| Notes payable to stockholders | 83,619 | 75,469 | ||||||
| Notes payable | 15,650 | 3,150 | ||||||
| Accrued interest payable - stockholders | 14,992 | 11,384 | ||||||
| Accrued interest payable - other | 552 | 37 | ||||||
| Total Current Liabilities | 172,518 | 140,209 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Deficit | ||||||||
| Preferred stock - $0.001 par value; 5,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Common stock - $0.001 par value; 50,000,000 shares authorized; 700,000 shares issued and outstanding | 70 | 70 | ||||||
| Additional paid-in capital | 63,586 | 63,586 | ||||||
| Accumulated deficit | (228,984 | ) | (203,836 | ) | ||||
| Total Stockholders' Deficit | (165,328 | ) | (140,180 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 7,190 | $ | 29 | ||||
The accompanying notes are an integral part of these financial statements
| F-4 |
Renewable Energy Acquisition Corp.
Statements of Operations
For the Years Ended December 31, 2020 and 2019
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Revenues | $ | - | $ | - | ||||
| Operating expenses | ||||||||
| Professional fees | 19,250 | 15,340 | ||||||
| Other expenses | 9,053 | 6,693 | ||||||
| Income-Standstill Payments | (10,000 | ) | - | |||||
| Total operating expenses | 18,303 | 22,033 | ||||||
| Loss from operations | (18,303 | ) | (22,033 | ) | ||||
| Other income (expense) | ||||||||
| Other income / (expenses): | ||||||||
| Gain on vendor settlement | - | 2,500 | ||||||
| Interest expense | (3,243 | ) | (3,485 | ) | ||||
| Interest expense - related party | (3,602 | ) | (2,750 | ) | ||||
| Total other income / (expenses): | (6,845 | ) | (3,735 | ) | ||||
| Loss before provision for income taxes | (25,148 | ) | (25,768 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss | $ | (25,148 | ) | $ | (25,768 | ) | ||
| Net loss per weighted-average share of common stock outstanding - basic and diluted | $ | (0.04 | ) | $ | (0.04 | ) | ||
| Weighted-average number of shares of common stock outstanding - basic and diluted | 700,000 | 700,000 | ||||||
The accompanying notes are an integral part of these financial statements
| F-5 |
Renewable Energy Acquisition Corp.
Condensed Statement of Changes in Stockholders’ Deficit
For the Years Ended December 31, 2020 and 2019
| Common Stock | Additional paid in | Accumulated | ||||||||||||||||||
| Shares | Amount | capital | deficit | Total | ||||||||||||||||
| Balance at December 31, 2018 | 700,000 | $ | 70 | $ | 63,586 | $ | (178,068 | ) | $ | (114,412 | ) | |||||||||
| Net loss | - | - | - | (25,768 | ) | (25,768 | ) | |||||||||||||
| Balance at December 31, 2019 | 700,000 | $ | 70 | $ | 63,586 | $ | (203,836 | ) | $ | (140,180 | ) | |||||||||
| Net loss | - | - | - | (25,148 | ) | (25,148 | ) | |||||||||||||
| Balance at December 31, 2020 | 700,000 | $ | 70 | $ | 63,586 | $ | (228,984 | ) | $ | (165,328 | ) | |||||||||
The accompanying notes are an integral part of these financial statements
| F-6 |
Renewable Energy Acquisition Corp.
Statements of Cash Flows
For the Years Ended December 31, 2020 and 2019
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | (25,148 | ) | $ | (25,768 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| (Increase) Decrease in | ||||||||
| Prepaid expenses | - | 1,688 | ||||||
| Increase (Decrease) in | ||||||||
| Accounts payable - trade | 7,536 | 11,533 | ||||||
| Accrued interest payable | 4,123 | 2,963 | ||||||
| Net cash used in operating activities | (13,489 | ) | (9,584 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Repayment of short-term advances | - | (5,000 | ) | |||||
| Cash received from notes payable | 12,500 | 3,150 | ||||||
| Cash received from notes payable to stockholders | 8,150 | 9,800 | ||||||
| Net cash provided by financing activities | 20,650 | 7,950 | ||||||
| Decrease in cash and cash equivalents | 7,161 | (1,634 | ) | |||||
| Cash and cash equivalents at beginning of period | 29 | 1,663 | ||||||
| Cash and cash equivalents at end of period | $ | 7,190 | $ | 29 | ||||
| Supplemental Disclosure of Interest and Income Taxes Paid | ||||||||
| Interest paid during the period | $ | 2,722 | $ | 3,272 | ||||
| Income taxes paid during the period | $ | - | $ | - | ||||
The accompanying notes are an integral part of these financial statements
| F-7 |
Renewable Energy Acquisition Corp.
Notes to Financial Statements
Note A - Background and Description of Business
Renewable Energy Acquisition Corp. (the “Company”) was incorporated on June 21, 2007 under the laws of the State of Nevada.
The Company was formed as a blank check company to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business in either the renewable energy or the environmental industry and their related infrastructures. To date, the Company’s efforts have been limited to organizational activities and the investigation of various potential business transactions, none of which has yet led to a definitive agreement.
Note B - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles and has elected a year-end of December 31.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented
For segment reporting purposes, the Company operated in only one industry segment during the periods represented in the accompanying financial statements and makes all operating decisions and allocates resources based on the best benefit to the Company as a whole.
Note C - Going Concern Uncertainty
The Company was formed to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business in either the renewable energy or the environmental industry and their related infrastructures. To date, the Company’s efforts have been limited to organizational activities and the investigation of various potential business transactions, none of which has yet led to a definitive agreement. There is no assurance that the Company will be able to be successful in the implementation of this business plan.
The Company has no operating history, limited cash on hand, no operating assets and has a business plan with inherent risk. Because of these factors, management has determined there is substantial doubt about our ability to continue as a going concern exists from the twelve months following the issuance of these financial statements.
Because of the Company's lack of operating assets, the Company’s continuance is fully dependent upon either future sales of securities and/or advances or loans from significant stockholders or corporate officers to provide sufficient working capital to preserve the integrity of the corporate entity during the development phase.
| F-8 |
The Company's continued existence is dependent upon its ability to implement its business plan, generate sufficient cash flows from operations to support its daily operations, and provide sufficient resources to retire existing liabilities and obligations on a timely basis. The Company faces considerable risk in its business plan and a potential shortfall of funding due to our uncertainty to raise adequate capital in the equity securities market.
The Company is dependent upon existing cash balances to support its day-to-day operations. In the event that working capital sufficient to maintain the corporate entity and implement our business plan is not available, the Company’s existing controlling stockholders intend to maintain the corporate status of the Company and provide all necessary working capital support on the Company's behalf. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or existing controlling stockholders to provide additional future funding. Further, the Company is at the mercy of future economic trends and business operations for the Company’s existing controlling stockholders to have the resources available to support the Company.
The Company anticipates offering future sales of equity securities. However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.
The Company’s Articles of Incorporation authorizes the issuance of up to 5,000,000 million shares of preferred stock and 5,000,000 shares of common stock. The Company’s ability to issue preferred stock may limit the Company’s ability to obtain debt or equity financing as well as impede the implementation of the Company’s business plan. The Company’s ability to issue these authorized but unissued securities may also negatively impact our ability to raise additional capital through the sale of our debt or equity securities.
In such a restricted cash flow scenario, the Company would be unable to complete its business plan steps, and would, instead, delay all cash intensive activities. Without necessary cash flow, the Company may become dormant during the next twelve months, or until such time as necessary funds could be raised in the equity securities market.
While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach its goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.
Note D - Summary of Significant Accounting Policies
Cash and cash equivalents
The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Income taxes
The Company files income tax returns in the United States of America and various states, as appropriate and applicable. The Company is no longer subject to U.S. federal, state and local, as applicable, income tax examinations by regulatory taxing authorities for any period prior to January 1, 2017.
The Company uses the asset and liability method of accounting for income taxes. At December 31, 2020 and 2019, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences. Temporary differences generally represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accrued interest.
Recognition of potential liabilities are required as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority. The Company has no liability for uncertain tax positions.
| F-9 |
Income (loss) per share
Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).
Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.
For the years ended December 31, 2020 and 2019, respectively, the Company did not have any outstanding items which could be deemed to be dilutive.
New and Pending Accounting Pronouncements
The Company is of the opinion that any and all pending accounting pronouncements, either in the adoption phase or not yet required to be adopted, will not have a significant impact on the Company's financial position or results of operations.
Note E - Fair Value of Financial Instruments
The carrying amount of cash, prepaid expenses, short term advances and notes payable, as applicable, approximates fair value due to the short-term nature of these items and/or the current interest rates payable in relation to current market conditions.
Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.
Note F - Income Taxes
The components of income tax (benefit) expense for the each of the years ended December 31, 2020 and 2019, are as follows:
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Federal: | ||||||||
| Current | $ | - | $ | - | ||||
| Deferred | - | - | ||||||
| - | - | |||||||
| State: | ||||||||
| Current | - | - | ||||||
| Deferred | - | - | ||||||
| - | - | |||||||
| Total | $ | - | $ | - | ||||
| F-10 |
As of December 31, 2020, the Company had an aggregate net operating loss carryforward(s) to offset future taxable income of approximately $203,000. The amount and availability of any net operating loss carryforward(s) will be subject to the limitations set forth in the Internal Revenue Code. Such factors as the number of shares ultimately issued within a three-year look-back period; whether there is a deemed more than 50% change in control; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of any net operating loss carryforward(s).
The Company's income tax (benefit) expense for the each of the years ended December 31, 2020 and 2019, are as follows:
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Statutory rate applied to loss before income taxes | $ | (4,709 | ) | $ | (4,826 | ) | ||
| Increase (decrease) in income taxes resulting from: | ||||||||
| State income taxes | - | - | ||||||
| Reserve for deferred tax asset | 4,709 | 4,826 | ||||||
| Income tax expense | $ | - | $ | - | ||||
The Company’s only temporary difference due to statutory requirements in the recognition of assets and liabilities for tax and financial reporting purposes, as of December 31, 2020 and 2019, respectively, relate solely to the Company’s net operating loss carryforward(s) and non-deductible interest expense. These differences give rise to the financial statement carrying amounts and tax bases of assets and liabilities causing either deferred tax assets or liabilities, as necessary, as of December 31, 2020 and 2019:
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Deferred tax assets | ||||||||
| Net operating loss carryforwards | $ | 42,700_ | $ | 37,991 | ||||
| Less valuation allowance | (42,700 | ) | (37,991 | ) | ||||
| Net Deferred Tax Asset | $ | - | $ | - | ||||
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Net loss before taxes per financial statements | $ | (25,148 | ) | $ | (25,768 | ) | ||
| Temporary differences | 2,725 | 2,787 | ||||||
| Taxable amount | (22,423 | ) | (22,981 | ) | ||||
| Income tax rate | 21 | % | 21 | % | ||||
| Income tax benefit at statutory rate | (4,709 | ) | (4,826 | ) | ||||
| Impact of change in tax rates | - | - | ||||||
| Change in valuation allowance | 4,709 | 4,826 | ||||||
| Provision for income taxes | $ | - | $ | - | ||||
| F-11 |
During the each of the years ended December 31, 2020 and 2019, the valuation allowance for the deferred tax asset changed by $4,709 and $4,826, respectively.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Corporate taxpayers may carryback net operating losses (NOLs) originating between 2018 and 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act.
The Company is currently evaluating the potential effects from the enactment of the CARES Act in 2020.
Note G - Notes Payable
During the year ended 2019, a third party loaned $3,150 in cash to the Company to support operations. During the year ended December 31, 2020, the third party loaned an additional $12,500 in cash to the Company to support operations. These advances are due upon demand and bear interest at 6.0% per annum. As of December 31, 2020 and December 31, 2019 accrued interest amounted to $552 and $37, respectively.
Note H - Notes Payable to Stockholders
During 2019, the majority stockholder loaned an additional aggregate $9,800 in cash to the Company to support operations. These advances are due upon demand and bear interest at 6.0% per annum.
The Company borrowed $8,150 from the majority shareholder during the year ended December 31, 2020. The advances are due upon demand and bear interest at 6.0% per annum.
The Company has accrued interest payable to the majority stockholder aggregating $14,992 and $11,384 as of December 31, 2020 and December 31, 2019, respectively.
As of December 31, 2020 and December 31, 2019, the outstanding aggregate balances payable to stockholders were as follows:
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Notes payable | $ | 83,619 | $ | 75,469 | ||||
| Accrued interest payable | 14,992 | 11,384 | ||||||
| Total due stockholders | $ | 98,611 | $ | 86,853 | ||||
| F-12 |
Note I - Contingencies
On March 11, 2020, the World Health Organization declared the new strain of the coronavirus (COVID-19) a global pandemic. Federal, state, and local governments have since implemented various restrictions, including travel restrictions, border closings, restrictions on public gatherings, quarantining of people who may have been exposed to the virus, shelter-in-place restrictions and limitations on business operations. While this uncertain matter may negatively impact the results of operations, cash flows and financial position of the Company in the future, the related financial impact cannot be reasonably estimated at this time.
Note J – Short Term Advances
During the year ended December 31, 2018, the Company borrowed $17,000 in advances from credit card lines of credit. During the year ended December 31, 2019 the Company repaid $5,000 leaving a balance of $12,000 at December 31, 2020 and 2019. The weighted average interest rate on these borrowings is approximately 15%. The unused credit limit on cash advances totaled approximately $0.00. During the year ended December 31, 2020 and 2019, the Company recorded interest expense of $2,725 and $3,488, respectively on these advances.
Note K – Standstill Agreement
On November 13, 2020, pursuant to a Standstill Agreement dated October 30, 2020 ("the Agreement"), the Company received a $5,000 standstill fee from Florida Intellectual Properties, LLC ("FIP"). Pursuant to the terms of the Agreement, the Company agreed to negotiate in good faith to enter into a business combination agreement with FIP, and to not consider or negotiate other similar transactions so long as the Agreement remains in effect. The Agreement does not obligate either party to consummate a transaction, and until a definitive agreement is reached, or until the Agreement is cancelled by either party. The Agreement does not obligate either party to consummate a transaction, and until a definitive agreement is reached, or until the Agreement is cancelled by either party, FPI agreed to pay an additional $5,000 standstill fee on the first of each successive month. For the year ended December 31, 2020 the Company received and recorded $10,000 as Income-Standstill Payments as an offset to operating expenses as the funds must be used for expenses incurred in the ordinary course of business.
Note L - Subsequent Events
Management has evaluated all activity of the Company through March 31, 2021, the issue date of the financial statements for disclosure purposes. The Company received an additional $9,000 in standstill fees from FIP during the period from January 1, 2021 through March 31, 2021, as of which date FIP is $6,000 in arrears in the payment of standstill fees due under the standstill agreement, and neither party has terminated the agreement.
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