Notes to the Financial Statements
1. DESCRIPTION OF BUSINESS
Lotus Bio-Technology Development Corp. (formerly Starflick.Com) (“we”, “our”, the “Company”) was formed on March 24, 2011 with planned principal operations as an independent motion picture producer. In 2016, the Company has shifted its focus and began exploring opportunities in the organic growth and farming sector in China.
2. GOING CONCERN
The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates realization of assets and liquidation of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred an accumulated deficit $929,399 through March 31, 2016. The Company has not generated any operating revenues to date, the Company has negative working capital, and existence is dependent upon management’s ability to develop profitable operations. These conditions raise substantial doubt that the Company will be able to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty.
Our activities to date have been supported by equity financing and demand loans from our major shareholder. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan and new course of action.
3. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
As at March 31, 2016 and 2015 cash and cash equivalents consist of only cash.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect 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 and assumptions.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. When property and equipment is retired or otherwise disposed of, the net carrying amount is eliminated with any gain or loss on disposition recognized in earnings at that time. Maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. As of March 31, 2016, the Company has $6,550 in software which is being depreciated over 3 years. The net book value is $5,458 as of March 31, 2016.
Impairment of long-lived assets
The Company reviews its long-lived assets, including property and equipment, identifiable intangibles, and goodwill annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows will be less than the carrying amount of the assets
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Related party
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions
Fair value of financial instruments
The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.
Our financial instruments consist principally of cash, accounts payable and accrued expenses and due to related party. ASC 820,
Fair Value Measurements and Disclosures
and ASC 825,
Financial Instruments
establish a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.
Fair Value Hierarchy
The Company has categorized its financial instruments, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
Financial assets and liabilities recorded on the balance sheet are categorized based on the inputs to the valuation techniques as follows:
Level 1
Financial assets and liabilities for which values are based on unadjusted quoted prices for identical assets or liabilities in an active market that management has the ability to access.
Level 2
Financial assets and liabilities for which values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (commodity derivatives and interest rate swaps).
Level 3
Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. The carrying amounts of cash, accounts payable and accrued expenses, and due to related party approximate fair value because of the short-term nature of these items.
Income taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Loss per Share
Loss per share is computed using the weighted average number of shares outstanding during the period. We have adopted ASC 260, "Earnings Per Share". Diluted loss per share for years ended March 31, 2016 and 2015 is the same as basic loss per share as there are no potential dilutive equity instruments.
F-7
Capital Stock – share structure
The Company’s articles of incorporation pertaining to stock has been amended as of July 16, 2015 to increase the authorized capital stock to 300,000,000 shares of common stock having par value of $0.00001 per share. The amendment was made and approved by the Company’s Board of Directors on July 15, 2015. On this date the Board of Directors had 83.3% of common stock which have 83.3% voting in favor of this amendment. The Company’s articles of incorporation pertaining to Stock has been amended as of July 21, 2015 to keep the authorized capital stock to 100,000,000 shares of preferred stock having par value of $0.00001 per share. The Board of Directors have 83.3% of common stock which have 83.3% voting in favor in keeping the preferred stock to 100,000,000 shares. All shares amount have been retroactively adjusted.
Stock-Based Compensation
The Company adopted ASC 718,
Compensation – Stock-Based Compensation
, to account for its stock options and similar equity instruments issued. Accordingly, compensation costs attributable to stock options or similar equity instruments granted are measured at the fair value at the grant date, and expensed over the expected vesting period. ASC 718 requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid. We did not grant any stock options during the years March 31, 2016 and March 31, 2015. We account for non-employee share-based awards in accordance with ASC 505-50.
Recent Accounting Pronouncements
The Company’s management has considered all recent accounting pronouncements. Management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
4. DUE TO RELATED PARTY
During the years ended March 31, 2016 and 2015, the majority shareholder of the Company paid $8,438 and $17,206 of its operating expenses, respectively shareholder.
During the year ended March 31, 2016, the majority shareholder, on behalf of the Company, purchased $6,550 of software from a third party. Further, the Company borrowed $2,037 from the majority shareholder and repaid $3,537.
As at March 31, 2016 and 2015, the balance due to related party was $51,458 and $37,970, respectively. The balances due to the majority shareholder are unsecured, non-interest bearing and due on demand
.
5. STOCKHOLDERS’ EQUITY
The Company’s articles of incorporation pertaining to stock has been amended as of July 16, 2015 to increase the authorized capital stock to 300,000,000 shares of common stock having par value of $0.00001 per share. The amendment was made and approved by the Company’s Board of Directors on July 15, 2015. The increase in authorized shares of common stock has been retroactively reflected in our financial statements.
On March 30, 2016, the board of directors of the Company, agreed to cancel 100,000,000 of Mr. Nagy’s, the former officer of the Company, previously issued shares for no consideration. Mr. Nagy retains possession of 50,000,000 shares which represents approximately 60.40% of issued common shares as of March 31, 2016
.
On November 24, 2015, the Company issued to a third party consultant 1,500,000 common shares for services rendered. The fair value of the common shares issued was $765,000 and was recorded by the Company as stock based compensation.
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6. INCOME TAX
The Company had net operating loss carryovers for federal income tax purposes totaling approximately $164,399 and $148,294, as of the years ended March 31, 2016 and 2015, respectively. The ultimate realization of such loss carryovers will be dependent on the Company attaining future taxable earnings. Based on the level of historical operating results and projections of future taxable earnings, management believes that it is more likely than not that the Company will not be able to utilize the benefits of these carryovers. Therefore, a full valuation allowance has been recorded against the gross deferred tax assets arising from these loss carryovers using an income tax rate of 35% resulting in deferred tax allowance of $57,540 and $51,540 for the year ended March 31, 2016 and 2015, respectively. If not utilized, the carryovers expire beginning in fiscal 2033. The Company has open tax years for 4 years prior to March 31, 2015.
The Company has not filed tax returns for the last 4 years.
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). Ownership changes may limit the amount of the NOL carry forwards that can be utilized annually to offset future taxable income and tax, respectively
7. SUBSEQUENT EVENTS
On April 1, 2016, Mr. Nagy, the sole director and President of the Company resigned from his position with immediate effect and was replaced by Mr. Michael Palethorpe.
On April 7, 2016, the name of the Company was changed to Lotus Bio-Technology Development Corp.
On May 7
th
, 2016, The Company also signed a marketing and distribution agreement with Hunan Canshi in China. Lotus Bio-Technology will provide Marketing, Sales and distribution for organic related products produced exclusively by Hunan Canshi. The term of the agreement is 10 years from May 7, 2016. General terms of the agreement state that Lotus will provide; Marketing, sales and distribution for Hunan Canshi and Hunan Canshi will provide a variety of Organic related products. Both Hunan Canshi and Lotus Bio-Technology intend to collaborate on a variety of business related issues such as promotion of products through social media and corporate website, development of joint marketing materials and training and support for all staff. The agreement also states that subsidiary company is to be created of which Lotus will own 51% of the newly created subsidiary in Hong Kong. As of today that process has not completed.
During April 2016, the Company borrowed $6,450 from the current CEO to pay for expenses on behalf of the Company. The advances are unsecured, due on demand and non-interest bearing.
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ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial disclosures from the inception of our company through the date of this Form 10-K. Our financial statements for the years ended March 31, 2016 and 2015, included in this report have been audited by MaloneBailey, LLP, as set forth in this annual report.
ITEM 9A.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this evaluation, our CEO and CFO concluded that our disclosure controls were not effective as of the end of the period covered by this report.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation 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 or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2016. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Thread way Commission (COSO) in
Internal Control-Integrated Framework
. Based on our assessment, as of March 31, 2016, the Company’s internal control over financial reporting are not effective due to the following material weaknesses identified by management: (1) limited or lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function, (2) Lack of multiple levels of supervision and review and (3) No independent directors.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
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Changes in Internal Controls
There were no changes in our internal control over financial reporting during the year ended March 31, 2016 that have affected, or are reasonably likely to affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION.
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our sole director will serve until his successor is elected and qualified. Our sole officer is elected by the board of directors to a term of one (1) year and serves until his or his successor is duly elected and qualified, or until he or she is removed from office. The board of directors has no nominating, auditing or compensation committees.
The name, address, age and position of our present sole officer and director is set forth below:
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Name and Address
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Age
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Position(s)
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Michael Palethorpe
Cave Creek, AZ 33185
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46
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president, principal executive officer, principal financial
officer, principal accounting officer, secretary, treasurer
and sole member of the board of directors
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The person named above has held his offices/positions since inception of our company and is expected to hold his offices/positions until the next annual meeting of our stockholders.
Background of Our Sole Officer and Director
Michael Palethorpe has been highly successful in business in a variety of newly emerging industries. He brings a vast array of experience and ground breaking success in both public and private companies and in the for-profit and non-profit worlds. Since 1998 Michael has founded several successful companies including a US Public Company and world leader in XML technologies in 1999, the world’s 2
nd
largest mountain bike web site with over 20,000 unique users per day in 2000, and was Regional Manager of a global educational enterprise, doubling participation in its courses in 2004 and 2005. In 2008, Michael was the top US Account Manager with Metasoft Systems, a world leader in Foundation funding for charities, and he vastly expanded their reach and scope in the non-profit world. From 2009 – 2011 Michael managed a team of account managers and millions of dollars a year in sales. Over the past few
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years Michael has been Sales Manager for a large Deal Flow company, and CEO of a Mobile Payments and Rewards company. He has over 25 years’ experience in various capacities of both for-profit and non-profit organizations. He has a "cut to the chase" style and is highly skilled in large, multi-faceted operations, including management, sales, training, implementation and delivery, and has passion for managing and empowering people and turning vision into reality.
On April 1
st
2016 Mr. Nagy resigned as principal officer and Director. Mr. Nagy was replaced by Michael Palethorpe.
Involvement in Certain Legal Proceedings
During the past ten years, Mr. Palethorpe has not been the subject of the following events:
1.
A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
2.
Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities;
i)
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
ii)
Engaging in any type of business practice; or
iii)
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
4.
The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity;
5.
Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
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6.
Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
7.
Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
i)
Any Federal or State securities or commodities law or regulation; or
ii)
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
iii)
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
8.
Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Audit Committee Financial Expert
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have no operations, at the present time, we believe the services of a financial expert are not warranted.
Conflicts of Interest
The only conflict that we foresee are that our sole officer and director will devote time to projects that do not involve us or are related in any manner to the film industry.
Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) Forms they file. This does not apply to Mr. Palethorpe as he holds no share position in the issuer.
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ITEM 11.
EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by us for the last two fiscal years ended March 31, 2016 for former sole officer. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid or named executive officers.
Summary Compensation Table