8-K 1 f8k080315_8k.htm FORM 8-K CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 30, 2015
CHERUBIM INTERESTS INC.
(Exact name of small business issuer as specified in its charter)
(State of other jurisdiction of incorporation or organization)
(Commission File Number)
(IRS Employer Identification No.)
1304 Norwood Dr., Bedford Texas 76022
(Address of principal executive offices and zip code)
(Registrant's telephone number including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:
__ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
__ Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))
__ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
__ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Forward Looking Statements
This Form 8-K and other reports filed by Cherubim Interests from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward-looking statements and information that is based upon beliefs of, and information currently available to Cherubim Interests’s management, as well as estimates and assumptions made by management. When used in the Filings the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions as they relate to us or our management, identify forward-looking statements. Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to industry, our operations and results of operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with the periodic reports, including the audited and unaudited consolidated financial statements therein, of Cherubim Interests as filed with the Securities and Exchange Commission.
In this Form 8-K, references to “we,” “our,” “us,” or the “Company” refer to Cherubim Interests and its subsidiaries and controlled companies.
Item 3.02. Unregistered Sales of Equity Securities.
As set forth in Item 5.03 below, we authorized the issuance of 1,000,000 shares of Series A Convertible Preferred Stock to each of our three directors, Patrick Johnson, Charly Everett, and Gary Fewell. The issuance of shares was exempt under Section 4(2) of the Securities Act as a transaction not involving any public offering or solicitation and also exempt under Section 4(6) as an offering solely to accredited persons.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
By consent action of the Board of Directors dated July 30, 2015, and consent action of the majority shareholders of the Company holding 57.9% of the 77,191,125 outstanding shares, the Company adopted amendments to its Articles of Incorporation. The amendments increased the number of authorized common shares from 200,000,000 to 500,000,000; authorized the issuance of 3,000,000 shares of Series A Convertible Preferred Stock; and authorized the issuance of 7,000,000 shares of Series B Convertible Preferred Stock.
The Series A Convertible Preferred Stock will be issued to our three directors. Each share of Series A Convertible Preferred Stock bears 100 voting rights and is convertible into one share of common stock at the option of the holder. The Series A Convertible Preferred Stock is not redeemable and has no cash dividend rights, but otherwise participates on par with common stock in the event of any non-cash dividend or liquidation distribution. The Board of Directors considers that the issuance of the Series A Convertible Preferred Stock is advisable in order to retain the services of the three members of the Board of Directors. Although this series will have the effect of deterring any takeover attempt of the Company, the Board of Directors is not aware of any contemplated takeover at this time.
The Series B Convertible Preferred Stock has not been issued to any person, but is intended to be issued in exchange for cash in one or more future offerings. No offering is being made at this time. The Series B Convertible Preferred Stock is convertible at a price of $2.00 per share and has voting, liquidation and dividend rights on a par with common stock on an as-converted basis. The Series B Convertible Preferred Stock is redeemable at its original purchase price plus accrued but unpaid dividends.
Item 9.01 Financial Statement and Exhibits.
Amendment to Articles of Incorporation
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 3, 2015
CHERUBIM INTERESTS, INC.
By: /s/ Patrick Johnson
Name: Patrick Johnson
Title: Chief Executive Officer
Cherubim Interests, Inc. is a development-stage alternative construction and real estate development company seeking various opportunities relative to the company's management team of experts in property management, construction and finance.
The company's primary focus is on the controlled environment agriculture industry, which Cherubim recently entered into by acquiring an exclusive worldwide license for a proprietary cultivation unit. Through its wholly owned subsidiary, BudCube Cultivation Systems USA, Cherubim plans to construct, deploy and lease scalable medical and recreational marijuana cultivation facilities for commercial applications.
Coupled with a real estate development and property management business model, BudCube Cultivation Systems ("BCS") can position itself anywhere in the world where the cultivation of cannabis is legal. BCS's unique business model positions the company to greatly benefit as more market participants seek to gain entry into a fast-growing market at an attractive price point.
Armed with the ability to lease a portable and scalable turn-key cultivation solution to growers, Cherubim aims to use its licensed solution to fill the gap for both first-time and experienced cultivators who may not have the capital resources to buy land, construct or tenant-improve existing structures for the optimum environment for developing a high-quality cannabis product.
- Diversified, Unique Business Approach Reduces Risk
Business Model Drives High Return On Capital
Business Model Features Raw Land Acquisitions with Redevelopment Opportunities
Exclusive Global License for Proprietary Technology
"Mini Storage" Business Model Participating in Burgeoning Legal Cannabis Cultivation Industry
BudCube Market Opportunities
BCS's current short-term opportunity is based solely on the legalization of Oregon Medical and Recreational Cannabis:
- Medical cannabis sales represents a market of $60 mm / year
Recreational cannabis sales represents a market of $550 - 600 mm / year
Demand for technology is strong
Demand is outpacing capacity in the short run
- Size of market estimate 35B - 451B
Legalization of medical cannabis in Canada effective April 2014
Rapid state-by-state Legalization initiatives of medical cannabis in the U.S.
23 States and the District of Columbia have some form of legalization in place
Size of market estimate 35B - 451B
Goal to use state of Oregon as "expansion model" into other states such as Nevada, California, Colorado, Washington, D.C. and Canada
Proprietary, fully portable and scalable, cultivation technology serves as a turnkey solution for cultivators of legal medical and recreational cannabis, as well as any other plant species
BUDCUBE CULTIVATION SYSTEM DEPLOYMENT VS TRADITIONAL CONSTRUCTION AND CULTIVATION TIMELINE
"With the ability to lease a portable and scalable turn-key cultivation solution to growers, we believe our licensed solution can fill the gap for many who want to enter into the industry as first-timers, or experienced cultivators who do not have the capital resources to buy land, construct or tenant-improve existing structures for the optimum environment for developing a high-quality cannabis product."
- CEO Patrick Johnson
Patrick J. Johnson CEO
Patrick Johnson majored in Journalism and Communications at the University of Oregon from 1994 to 1997, and attended the Craig James Broadcast School in 2000. Johnson has held C-Level positions in the oil and gas, construction, consumer products, and nutraceutical industries in both public and private sectors, as well as consulting in the private equity, mining, gaming, entertainment, Internet, and corporate finance industries. Patrick has assisted several charities and non-profit organizations with his volunteer and fund raising efforts. During his NFL career, Patrick pledged money for the Baltimore Ravens/Police Athletic League Challenge of Champions, modeled in a Tommy Hilfiger Fashion Show to help raise money for the Living Classrooms Foundation of Baltimore, an educational program that targets at-risk youth, and also spearheaded the fifth annual "Baltimore Reads Books for Kids Day" at Baltimore Polytechnic High School in 2000, helping the group collect nearly 25,000 children's books that were distributed to low-income families.
Patrick was a two-sport athlete at the University of Oregon, excelling in both football and track, winning numerous awards and championships during his collegiate athletic career. As an Olympic caliber sprinter, Johnson won the Pac-10 Championships in the 400 meters, an NCAA All-American at 100 and 200 meters, and defeated the legendary Carl Lewis in a 100-meter race at the Drake Relays in 1995. As all pacific – 10 / All American wide receiver and kick returner at Oregon, he was Offensive MVP of the 1997 Las Vegas Bowl and was also a member of UO's 1994 Rose and 1995 Cotton Bowl teams. Johnson was inducted into the University of Oregon Athletics Hall of Fame for both sports in 2014, and was the 42nd overall pick in the 1998 NFL draft. Johnson also earned a Super Bowl ring when the Baltimore Ravens defeated the New York Giants 34 -17 in Super Bowl XXXV.
Corbin Grubbs CFO
Corbin Grubbs 38, a graduate of Texas Tech University, is the former Director and Chief Financial Officer of a nationally recognized debt purchaser. For over eight years he was an instrumental part of the executive management team that eventually sold the Company's portfolio of assets to a larger publically held debt buyer. Grubbs has over 20 years of accounting and financial business experience. Prior to this engagement, Corbin has held various management and leadership positions with both private and publically held organizations within the automotive, healthcare, financial services, and manufacturing industries. These opportunities have been with market leaders within their respective areas of expertise and some have annual revenues in excess of forty million dollars.
Jon Seidel is an experienced educator, religious leader, and community interfaith activist in Eugene Oregon, with a PhD from UC Berkeley (1996) and was a Hayes-Fulbright scholar at Cambridge University in England. Jon has taught at many West Coast institutions including Stanford, Berkeley, ASU, the University of Arizona, Portland State and the University of Oregon. He is working on a number of civic projects including post modern spirituality (TV series), Jewish cultural education and several books that include research in healing, magic and religion in history. In years past he led Spritual Wilderness trips for teens and College age youth. His has been active his whole adult life in Religion and Environmental Education, New Ethnic Music and is a trained Cantor.
QualityStocks is a moderator of this board. Please see disclaimer on the QualityStocks website: http://disclaimer.qualitystocks.net
Please note, Falcon Crest Energy Inc. (FCEND) is now Cherubim Interests, Inc. (CHIT)
As of 07/13/2015, FCEND is now CHIT http://otce.finra.org/DLSymbolNameChanges
As of 06/15/2015, FCEN is now FCEND http://otce.finra.org/DLSymbolNameChanges
Prior to Falcon Crest Energy (FCEN), this was Panther Energy Inc. (PNEG)
Prior to Panther Energy Inc. (PNEG), this was Innocent Inc. (INCT)
Current Report Filing (10-Q) from 07/20/2015 http://www.sec.gov/Archives/edgar/data/1421865/000107878215001127/f10q053115_10q.htm
10-Q 1 f10q053115_10q.htm FORM 10-Q QUARTERLY REPORT
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
X . QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED May 31, 2015
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM __________ to __________
Commission File Number 333-150061
CHERUBIM INTERESTS INC.
(Exact name of small business issuer as specified in its charter)
(State of other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
1304 Norwood Dr.
Bedford TX. 76022
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: 844 842 8872
325 N. St. Paul Street , Suite 3100
Dallas TX. 75201
(Former address if changed since last report)
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X . No .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes . No X ..
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):
Large accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
Smaller reporting company X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes . No X ..
As of July 20, 2015 there were 58,622,167 shares of common stock, par value $0.001, outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
ITEM 4. CONTROLS AND PROCEDURES
PART II - OTHER INFORMATION
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
CHERUBIM INTERESTS INC.
(A Development Stage Company)
UNAUDITED FINANCIAL STATEMENTS
May 31, 2015
Condensed Balance Sheets as of May 31, 2015 (Unaudited) and August 31, 2014
Condensed Statements of Operations for the Three and Nine Months Ended May 31, 2015 and 2014 (Unaudited)
Condensed Statements of Cash Flows for the Three and Nine Months Ended May 31, 2015 and 2014 (Unaudited)
Notes to Unaudited Condensed Financial Statements
CHERUBIM INTERESTS INC.
Condensed Balance Sheets
CHERUBIM INTERESTS INC. NOTE 1 – CONDENSED FINANCIAL STATEMENTS
Notes to Condensed Unaudited Financial Statements
May 31, 2015
The accompanying financial statements have been prepared by Cherubim Interests Inc. (the "Company") without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at May 31, 2015 and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s August 31, 2014 and 2013 audited financial statements. The results of operations for the period ended May 31, 2015 are not necessarily indicative of the operating results for the full year. NOTE 2 – NATURE OF BUSINESS
The Company was incorporated in the State of Nevada, United States of America on September 27, 2006 and its fiscal year end is August 31. The Company was engaged in sales of new food products produced or developed by North American companies to foreign markets and discontinued that business in August 2009. Pursuant to an Agreement and Plan of Reorganization dated April 27, 2015, the Company agreed to acquire all of the membership interests of Cherubim Interests, LLC, a limited liability company, from Victura Construction Group, Inc. (“Victura”). Victura is an affiliate of Patrick Johnson, a director and President of the Company, and is a non-reporting public company trading under the symbol VICT. The acquisition closed on April 27, 2015. Pursuant to the acquisition, the Company has (a) effected a 1-for-15 reverse stock split, such that the 83,626,881 outstanding shares of common stock will be reclassified as 5,575,125 shares of new common stock; (b) issued 60 million shares of new common stock to Victura in the exchange; (b) amended the Articles of Incorporation to change the name of the Company to “Cherubim Interests, Inc., “ and (c) accepted the resignation of director and officer Terry Lynch and the appointment of new directors to serve with Patrick Johnson. As a result, there are approximately 65,575,125 outstanding shares of Common Stock, plus some number of additional shares (estimated not to exceed 1,000) to be issued for rounding of the reverse stock split. On or about April 27, 2015, the Company assigned its interest in the Rocky Ford oil and gas lease to outgoing director Terry Lynch in settlement of its debt in compensation and severance benefits due to him.
The acquisition of Cherubim and the disposition of the Rocky Ford lease reflects the Company’s change of business direction from oil and gas (resulting from the recent decline in market prices) to its adoption of the new business strategy and focus in alternative construction, as well as multi-family real estate development, management, and investment. NOTE 3 – GOING CONCERN
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. The Company has accumulated deficit since inception of $3,408,373 and a negative working capital of $2,373,259 as of May 31, 2015. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has minimal cash and no material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company. NOTE 4 - CONVERTIBLE NOTES PAYABLE
On August 5th, 2014, the Company issued a convertible promissory note in the amount of $32,500. The note is due on May 7th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. On February 13, 2015, $12,000 of the principal was converted into 1,333,333 common shares resulting in a loss on extinguishment of debt of $8,667.
On August 5th, 2014, the Company issued a convertible promissory note in the amount of $36,750. The note is due on August 5th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 55% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the conversion date. On February 19, 2015, the note was cancelled by the holder resulting in a gain on extinguishment of debt of $38,329.
On August 12th, 2014, the Company issued a convertible promissory note in the amount of $25,000. The note is due on August 12th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the fifteen (14) trading day period ending on the latest complete trading day prior to the conversion date. On February 18, 2015, $1,500 of the principal was converted into 193,548 common shares resulting in a loss on extinguishment of debt of $1,577.
On September 8th, 2014, the Company issued a convertible promissory note in the amount of $32,500. The note is due on June 10th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date.
On December 19th, 2014, the Company issued a convertible promissory note in the amount of $33,000. The note is due on September 26th, 2015 and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. NOTE 5 – DERIVATIVE LIABILITIES
In accordance with AC 815, the Company has bifurcated the conversion feature of their convertible notes and recorded a derivative liability on the date each note became convertible. The derivative liability was then revalued on each reporting date. The Company uses the Black-Scholes option pricing model to value the derivative liability. Included in the model to value the derivative liabilities of the above loans are the following assumptions: stock price at valuation date of $0.010 - $0.017, exercise price of $0.006 - $0.009, dividend yield of zero, years to maturity of 0.027 – 0.260, a risk free rate of 0.07% - 0.11%, and annualized volatility of 1% - 217%. The above loans were all discounted in full based on the valuations and the Company recognized an additional derivative expense of $78,814 upon recording of the current period’s derivative liabilities. Once the loans are fully converted, the remaining derivative liability is reclassified to equity as additional paid-in capital. As of May 31, 2015, unamortized debt discount totaling $33,000 remained.
ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with the above convertible debt. During the period ended May 31, 2015, the Company recorded a total change in the value of the derivative liabilities of $(45,299).
From inception to May 31, 2015 the Company has not granted any stock options. NOTE 6 - STOCKHOLDERS' EQUITY
The total number of common shares authorized that may be issued by the Company is 200,000,000 shares with a par value of $0.001 per share and 10,000,000 preferred shares.
On October 21, 2014 1,000,000 shares were issued to Cloud Solutions LLC for services.
On October 29, 2014 3,000,000 shares were issued to Corporate Ads LLC for services.
On February 11, 2015 4,000,000 shares were issued to an executive of the company for services.
On February 11, 2015 1,000,000 shares were issued for services.
On February 13, 2015 1,333,333 shares were issued on conversion of a convertible promissory note.
On February 18, 2015 193,548 shares were issued on conversion of a convertible promissory note.
On April 23, 2015 10,000,000 shares were issued to an executive of the company for services NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has current loans totaling $1,324,848 to fund operations which carry varying interest rates. As of May 31, 2015 (May 31, 2014), the Company owed $1,342,848 ($1,324,848) of principal plus accrued interest of $488,415 ($245,007). The loans are unsecured and due on demand and as such are included in current liabilities. A portion of the related party transactions were reclassified in 2014 to properly reflect the relationship with the company. NOTE 8 – NOTE RECEIVABLE
The Company has advanced funds totaling $540,010 to Steele Resources with the intention of establishing a joint venture. The venture did not materialize and Steele Resources has agreed to return the funds to the Company. We have not received repayment as of May 31, 2015 and have established a full reserve against the balance as a result.
The Company has advanced funds totaling $338,344 to Global Finishing with the intention of establishing a joint venture. The venture did not materialize. We have not received repayment as of May 31, 2015 and have established a full reserve against the balance as a result. NOTE 9 – SUBSEQUENT EVENTS
On June 4, 2015 the Company converted $150,000 of debt currently owed at 0.15 per share price for a total of 1,000,000 shares.
On June 4, 2015 1,000,000 shares were issued on conversion of a convertible promissory note.
On June 18 2015 40,000,000 shares were issued to Victura Construction Group, Inc. per an Agreement and Plan of Reorganization.
On June 18, 2015 12,500,000 shares were issued to executives of the company for services.
On June 30, 2015 200,000 shares were issued to Antevora Capital Partners LTD. for consulting services.
On June 30, 2015 the Company through right of first refusal acquired an exclusive global licence to deploy a Controlled Environment Agriculture Technology from Victura Construction Group Inc.
On June 30, 2015 333,333 shares were issued to Jonathan Seidel for consulting services. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management's plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" and the risks set out below, any of which may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
- the uncertainty of profitability based upon our history of losses;
- risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern;
- risks related to our international operations and currency exchange fluctuations;
- risks related to product liability claims;
- other risks and uncertainties related to our business plan and business strategy.
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.
Forward looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", the "Company" and "Falcon" mean Falcon Crest Energy Inc., unless otherwise indicated.
Our Current Business
On 10/30/2013 Innocent Inc. and Ewing Oil Company LLC, a Colorado, Limited Liability Corporation whose principal place of business is located at P.O. Box 431, Burbank, California 91503 singed an asset purchase agreement. Ewing Oil Company is majority owned by Patrick Johnson, a current Director and COO of Innocent Inc. The agreement includes the sale, assignment, transfer, conveyance and deliver to Innocent Inc. free and clear of all liens, encumbrances, claims, clouds, charges; intellectual property, goodwill, materials, supplies, business records, and other proprietary assets in regard to Oil And Gas Leases (the “Leases”) located in Texas and Oklahoma. The purchase price of two hundred seventy three thousand five hundred dollars ($273,500) is payable by the issuance of a note payable with the annual interest rate of ten percent (10%). Innocent Inc. will seek the funding to complete the necessary drilling program and secure the leases. The agreement will include the following intellectual property and assets.
On 11/4/ 2013 the company received official communication that Marcus Mueller, was resigning as a Director of Innocent Inc. to pursue other interest. The Board of Directors then appointed Patrick Johnson to serve as a Director of Innocent Inc.
On 11/13/2013 the Board of Directors appointed Patrick Johnson (37), Chief Operating Officer (COO).
On 11/13/2013 Innocent Inc. signed an exploration agreement with Evergreen Petroleum of Dallas, TX. Evergreen has over 150 years’ experience in the oil and gas industry, and particular with expertise in the state of Wyoming will be the General Manager of the Exploration Project including selection of areas to lease, drilling exploratory wells, drilling development wells, and producing oil and gas found. Evergreen has conducted and will continue to conduct both regional and local geological studies to define prospects that are worthy of acquiring oil and gas leases. Preliminary examinations of title to the minerals in these selected areas and the acquisition of said leases will be carried out for and on behalf of the Parties by Pacer Energy LLC (“Pacer”) of Gillette, Wyoming. The Operator of the drilling venture will be L & J Operating Inc. of Gillette, Wyoming, with the responsibility of obtaining the required bonds, preparation of the Joint Operating Agreement A.A.P.L. Form 610 – 1989. This team will be responsible for the selection of all contractors and suppliers, payment of all invoices, sale of produced oil, payment of Ad Valorem, Conservation, and Severance Taxes and payment to the Parties of their net income on a monthly basis. We will engage engineering and geological consultants as required. All the activities of the Operator shall be under the supervision of the parties to this agreement including daily and other interval reports. Innocent Inc. will be responsible for the funding of this project, with the initial operating funds of twenty-five thousand dollars ($25,000) due in 30 days from the date of the agreement.
On 11/14/2013 the Board of Directors authorized the issuance of five million (5,000,000) shares of rule 144 restricted common stock at a price of .015 per share value paid by the company and issued to Patrick Johnson for accepting the COO position, service as a Director and his efforts to bring a new venture and funding to the company. This issuance represents ownership of 20% of the current authorized and outstanding shares (25,000,000) of Innocent Inc. RESULTS OF OPERATIONS
The following is a discussion and analysis of our results of operation for the three month and nine month period ended May 31, 2015, and the factors that could affect our future financial condition. This discussion and analysis should be read in conjunction with our unaudited financial statements and the notes thereto included elsewhere in this quarterly report. Our financial statements are prepared in accordance with United States generally accepted accounting principles. All references to dollar amounts in this section are in United States dollars unless expressly stated otherwise.
Our gross revenue for the three-month period ended May 31, 2015, was $0, compared to $0 for the same period in fiscal 2014. Prior revenues and cost of sales have been included in income from discontinued operations. Operating Expenses
The primary increase in the operating expenses for the three and nine months ended May 31, 2015 over the prior periods was the increase in consulting fees accrue and paid in shares. This was partially offset by the fact that there were no exploration expenses in the three and nine months ended May 31, 2015. Liquidity and Capital Resource
) Cash Flows
The Company had cash of $0; accounts payable and accrued liabilities of $129,708, notes payable totalling $368,837, related party notes totalling $1,324,848, accrued interest of $488,415 and derivative liability of $61,451. We also had interest expense of $40,752 and $106,544 for the three and nine months ended May 31, 2015. Cash Used In Operating Activities
The Company’s cash balance of $0 as of May 31, 2015, is a decrease of $11,489 during the nine months ended as compared to $11,489 at August 31, 2014. Going Concern
The audited financial statements for the year ended August 31, 2014, included in our annual report on the Form 10-K filed with Securities and Exchange Commission, have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has generated no revenue since inception, and has never paid any dividends and is unlikely to pay dividends or generate substantial earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at May 31, 2015, our company has accumulated losses of $3,647,100 since inception. As we do not have sufficient funds for our planned operations, we will be required to raise additional funds for operations and expansion.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended August 31, 2014, our independent registered auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent registered auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. Future Financings
The company’s operating budget to maintain the public entity reporting requirements is approximately $50,000. We continue to present to various funding groups the current opportunities in attempts to secure additional capital.
We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to secure sufficient funding from the sale of our common stock to fund our marketing plan and operations. At this time, we cannot provide investors with any assurance that we will be able to secure sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing and continue to be dependent upon related party/shareholder funding. The company plans to secure additional capital by the use of Notes Payable, Convertible Notes Payable, Private Placements, and partnerships and revenue sharing in future opportunities. This financing activity may lead to stock dilution and changes in control Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders. Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable. Item 4T. Controls and Procedures. Evaluation of Disclosure Controls and Procedure
We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15 (e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure.
The Company's Chief Executive Officer, who is its principal executive and chief financial officer, completed an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period (Feb 28, 2014) covered by this Form 10-Q. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company's Chief Executive Officer & CFO, has concluded the Company's disclosure controls and procedures, as of the end of the fiscal year covered by this Form 10-Q were ineffective because of comments from the SEC that required additional disclosure and restatement of other disclosed information.
Based upon the evaluation of our controls, the chief executive officer/CFO has concluded that, the disclosure controls and procedures are ineffective providing reasonable assurance that material information relating to the company activity is communicated in sufficient detail. Although, changes have been made to provide the level of detail that is required in the company filings based upon the SEC comments, the company is not prepared at this time to remove the ineffective status of the disclosure controls and procedures. The company will continue to work in these deficiencies. Changes in Internal Control Over Financial Reporting.
There was no change in our internal control over financial reporting that occurred during the last fiscal quarter ended May 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None. ITEM 1A. RISK FACTORS.
Risks and Uncertainties WE MAY BE ADVERSELY AFFECTED BY VALUE OF OUR PRODUCT GIVEN IT IS SET BY WORLD DEMAND AND BEYOND OUR CONTROL
We face risks of losses in inventory value given the nature of the valuation of precious metals. The value of such metals is determined by the demand for them on a global scale and is beyond our control. While we do not anticipate there to be a significant decrease in the value of precious metals, we cannot guarantee any such change in value THERE IS SUBSTANTIAL UNCERTAINTY AS TO WHETHER WE WILL CONTINUE OPERATIONS.
If we discontinue operations, you could lose your investment. Our auditors have discussed their uncertainty regarding our business operations in their audit report dated August 31, 2014. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such, we may have to cease operations and you could lose your entire investment. WE LACK AN OPERATING HISTORY
There is no assurance that our future operations will result in continued profitable revenues. If we cannot generate sufficient revenues to operate profitably, our business will fail. We have very little operating history upon which an evaluation of our future success could be determined. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business. BECAUSE OUR MANAGEMENT DOES NOT HAVE PRIOR EXPERIENCE IN MINING, OUR BUSINESS HAS A HIGHER RISK OF FAILURE.
Our current directors do not have experience in the mining industry. As a result, we may not be able to recognize and take advantage of opportunities without the aid of qualified marketing and business development consultants. Our directors' decisions and choices may not be well thought out and our operations, earnings and ultimate financial success may suffer irreparable harm as a result. OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS AND THE FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these l penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker- dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the National Association of Securities Dealers believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The National Association of Securities Dealers' requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock . ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the period from September 27, 2006 (inception) to November 30, 2008, the Company issued 4,000,000 shares of common stock at $0.001 per share to its directors for total proceeds of $4,000 and 3,000,000 shares of common stock at $0.010 per share for total proceeds of $30,000. These funds we used for company initial operating expenses.
On September 19, 2009 convertible notes in the amount of $10,000.00 were converted to 10,000,000 shares of rule- 144 restricted common stock. The value of the shares was determined by the Board of Directors at the time the Company secured ten thousand dollars ($10,000.00) in funding from outside parties to fund the company, that funding was completed at .001 per share. The company issued 3,000,000 shares as approved by the Board of Directors to the President and CEO Wayne A Doss, for services valued at $3,000.00 at the same per share basis as the convertible Notes.
During the year ended August 31, 2010 the Company also issued 3,000,000 shares of its common stock to its president for consideration of services provided. These shares were valued at $.001 per share for total consideration of $3,000. Further during the year ended August 31, 2010, the Company issued 10,000,000 shares valued at $.001 for the conversion of a $10,000 note payable. The funds were utilized for company operations. Also during the year ended November 30, 2010 the Company issued 10,000,000 shares of its common stock which were held in escrow pending the close of a share exchange. These shares were rescinded.
On 11/14/2013 the Board of Directors authorized the issuance of five million (5,000,000) shares of rule 144 restricted common stock at a price of .015 per share value paid by the company and issued to Patrick Johnson for accepting the COO position, service as a Director and his efforts to bring a new venture and funding to the company. This issuance represented ownership of 20% of the then authorized and outstanding shares (25,000,000) of Falcon Crest Energy Inc.
On 11/26/2013 the Board of Directors authorized the conversion of old debt into Falcon Crest Energy Inc. Free Trading Common Stock in the amount of thirty three thousand dollars ($33,000) to QuoteBrand at a conversion rate of $.03 cents per share for a total of one million one hundred thousand shares (1,100,000) of Falcon Crest Energy Inc. common stock. This conversion will reduce the QuoteBrand Note Payable, issued on February 15, 2011 for cash funds received by Falcon Crest Energy Inc.
On 7/11/14 the Board of Directors authorized the conversion of existing debt into Falcon Crest Energy Inc. Free Trading Common Stock in the amount of thirty three thousand dollars ($81,000) to QuoteBrand at a conversion rate of $.03 cents per share for a total of two million seven hundred thousand shares (2,700,000) of Falcon Crest Energy Inc. common stock. This conversion will reduce the QuoteBrand Note Payable, issued over the past several years for cash funds received by Falcon Crest Energy Inc. with a current balance due of ninety thousand seven hundred forty eight dollars ($90,700) as of August 31, 2014. ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None ITEM 5. OTHER INFORMATION.
None ITEM 6. EXHIBITS Exhibit Number Title of Document
31.1 Sec.302 Certification of CEO/CFO
32.1 Sec.906 Certification of CEO/CFO
101 XBRL (eXtensible Business Reporting Language)
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cherubim Interests Inc.
/s/ Patrick Johnson
July 20, 2015