Company Quick10K Filing
Quick10K
Kinetic Group
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-K 2018-09-30 Annual: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-K 2017-09-30 Annual: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
8-K 2018-09-28 Officers, Other Events, Exhibits
8-K 2018-08-21 Sale of Shares
8-K 2018-03-29 Sale of Shares, Other Events, Exhibits
8-K 2018-03-12 Officers, Exhibits
OPVS Nanoflex Power 35
HKEB HK Ebus 0
HSTC HST Global 0
DOYU DouYu 0
HBUV Hubilu Venture 0
FCE Forest City Realty Trust 0
ISRB Inspired Builders 0
IMAGE Image International Group 0
FNM Federal National Mortgage Association Fannie Mae 0
QBSI Quantum Business Strategies 0
GROUP 2019-06-30
Note 1 - Organization and Operations
Note 2 - Summary of Significant Accounting Policies
Note 3 - Going Concern
Note 4 - Property and Equipment
Note 5 - Related Party Transactions
Note 6 - Stockholders' Equity (Deficit)
Note 7 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits The Following Documents Are Filed As A Part of This Report or Are Incorporated By Reference To Previous Filings, If So Indicated:
EX-31 exhibit311.htm
EX-31 exhibit312.htm
EX-32 exhibit321.htm
EX-32 exhibit322.htm

Kinetic Group Earnings 2019-06-30

GROUP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 kineticg10q063019.htm FORM 10-Q kineticg10q063019.htm - Generated by SEC Publisher for SEC Filing

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x

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

 

 

For the quarterly period ended June 30, 2019

 

or

 

 

o

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

 

For the transition period from                    to                   

 

Commission File Number: 333-216047

 

Kinetic Group Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada

 

47-4685650

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

 12001 Research Parkway, Suite 236

Orlando, Florida

 

 

32826

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number including area code: (407) 604-1454

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]  No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.  Yes [X]  No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [   ]

 

Accelerated filer [   ]

Non-accelerated filer [   ]

 

Smaller reporting company [X]

 

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

Applicable Only to Corporate Issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

 

 Class

 

Outstanding as of August 14, 2019

Common Stock, $0.001 par value

 

5,060,000

 

 


 
 

 

KINETIC GROUP INC.

 

 

 

TABLE OF CONTENTS

 

 

Page

PART I - FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements.

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

18

6Item 3. Quantitative and Qualitative Disclosures About Market Risk.

26

Item 4. Controls and Procedures.

26

 

PART II - OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings.

27

Item 1A. Risk Factors.

27

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

27

Item 3. Defaults Upon Senior Securities.

27

Item 4. Mine Safety Disclosures.

27

Item 5. Other Information.

27

Item 6. Exhibits.

28

 

SIGNATURES

28

 

 

 

 

 

 

 

 

 

2

 


 

 

 

 

KINETIC GROUP INC.

 

For the Three and Nine Months Ended June 30, 2019 and 2018

 

(Unaudited)

 

Index to the Consolidated Financial Statements

 

 

Contents

Page

 

 

Consolidated Balance Sheets at June 30, 2019 and September 30, 2018

F-1

 

 

Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2019 and 2018

F-2

 

 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three Months ended June 30, 2019 and 2018

F-3

 

 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Nine Months ended June 30, 2019 and 2018

F-4

 

 

Consolidated Statements of Cash Flows for the Three and Nine Months Ended June 30, 2019 and 2018

F-5

 

 

Notes to the Consolidated Financial Statements

F-6

 

 

 

 

 

 

 

3

 

 


 

 

 

 

KINETIC GROUP INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

  

 

 

June 30,

2019

September 30,

2018

ASSETS

Current Assets:

 

 

 

Cash

$                          60

$                   5,748

 

Prepaid expenses

-

275

 

 

       Total current assets

                  60

                  6,023

Property and equipment, net

159

1,609

Total Assets

$                        219

$                    7,632

 

 

 

 

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current Liabilities:

 

 

 

Accounts payable and accrued liabilities

$                    30,136

$                  21,876

 

Accounts payable - related parties

                  15,025

                  6,025

 

Payroll taxes payable

                  -

                  516

 

Clients’ deposits

2,050

-

 

 

   Total current liabilities

                  47,211

                  28,417

Total Liabilities

                  47,211

                  28,417

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

Stockholders' Equity (Deficit):

 

 

 

Common stock, par value $0.001 per share, 75,000,000 shares authorized; 5,060,000 shares issued and outstanding

as of June 30, 2019 and September 30,2018, respectively

                    5,060

                    5,060

 

Additional paid-in capital includes $57,452 of forgiven debt by related

parties as of June 30, 2019 and September 30, 2018

 

 

 

Additional paid-in capital

99,017

99,017

 

Accumulated deficit

                 (151,069)

                 (124,862)

 

 

   Total stockholders' equity (deficit)

                 (46,992)

                   (20,785)

Total Liabilities and Stockholder's Equity (Deficit)

  $                     219

$                  7,632

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

F-1

 


 

 

 

KINETIC GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months

Ended

June 30,

2019

 

Three Months

Ended

June 30,

2018

 

Nine Months

Ended

June 30,

2019

 

Nine Months

Ended

June 30,

2018

 

 

 

 

 

  Revenue

 $                      1,500

 $                     16,000

 $                       10,350

 $                     41,950

  Cost of revenue

               750

               2,800

               4,200

               8,500

  Gross profit

             750

             13,200

             6,150

             33,450

 

 

 

 

 

  Operating Expenses:

 

 

 

 

 

Compensation – officers

               2,250

               13,050

               4,800

               17,602

 

Professional fees

3,500

4,500

14,350

12,150

 

Salaries

-

9,710

-

12,957

 

General and administrative

             4,372

             12,478

             13,207

             36,711

 

 

Total operating expenses                  

             10,122

             39,738

             32,357

             79,420

  Loss from Operations

             (9,372)

             (26,538)

             (26,207)

             (45,970)

  Income tax provision

             -

                     -

             -

                     -

  Net Loss

$                   (9,372)

$                (26,538)

$                     (26,207)

$                   (45,970)

 

 

 

 

 

  Net Loss Per Common Share:

 

 

 

 

 

Net income per common share - Basic and Diluted

  $                        0.00

  $                       0.01

  $                            0.00

  $                          0.01

 

Outstanding - Basic and Diluted

        5,060,000

        4,902,637

        5,060,000

        4,820,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-2

 


 

 

  

KINETIC GROUP INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’EQUITY (DEFICIT)

For the Three Months Ended June 30, 2019 and 2018

(Unaudited)

 

Description

Common stock

Additional

 

Accumulated

Deficit

Total

Shares

Amount

 Paid-in Capital

 

 

 

 

 

 

Balances at March 31, 2018

                     4,780,000

$                        4,780

$                    67,245

$                   (54,219)

$                        17,806

 

 

 

 

 

 

Common stock issued for cash at $0.02 per share

       180,000

              180

              3,420

                     -

              3,600

Net income (loss)

                     -

                     -

                     -

             (26,538)

             (26,538)

Balances at June 30, 2018

4,960,000

$                         4,960

$                    70,665

$                   (80,757)

$                       (5,132)

 

 

 

 

 

 

Balances at March 31, 2019

                     5,060,000

$                           5,060

$                      99,017

$                   (141,697)

$                      (37,620)

 

 

 

 

 

 

Net income (loss)

                     -

                     -

                     -

           (9,372)

           (9,372)

Balances at June 30, 2019

     5,060,000

$                         5,060

$                    99,017

$                (151,069)

$                    (46,992)

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

 

 

F-3

 

 


 

 

  

KINETIC GROUP INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’EQUITY (DEFICIT)

For the Nine Months Ended June 30, 2019 and 2018

(Unaudited)

 

Description

Common stock

Additional

 

Accumulated

Deficit

Total

Shares

Amount

 Paid-in Capital

 

 

 

 

 

 

Balances at September 30, 2017

                     4,780,000

$                        4,780

$                 33,495

$                  (34,787)

$                         3,488

 

 

 

 

 

 

Common stock cancellation

       (2,750,00)

            (2,750)

              2,750

                     -

            - 

Common stock issued for cash at $0.001 per share

       2,750,00

              2,750

              -

                     -

              2,750

Common stock issued for cash at $0.02 per share

       180,000

              180

             3,420

                     -

              3,600

Debt forgiveness – related party

-

-

              31,000

                     -

            31,000

Net income (loss)

                     -

                     -

                     -

             (45,970)

             (45,970)

Balances at June 30, 2018

4,960,000

$                        4,960

$                 70,665

$                  (80,757)

$                      (5,132)

 

 

 

 

 

 

Balances at  September 30, 2018

     5,060,000

$                        5,060

  $                 99,017

$                (124,862)

   $                    (20,785)

 

 

 

 

 

 

Net income (loss)

                     -

                     -

                     -

           (26,207)

           (26,207)

Balances at June 30, 2019

     5,060,000

$                        5,060

$                99,017

$                (151,069)

$                    (46,992)

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

F-4

 

 


 

 

 

KINETIC GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Nine Months

Ended

June 30,

2019

Nine Months

Ended

June 30,

2018

Operating Activities:

 

 

 

Net Loss

$                        (26,207)

$                        (45,970)

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities

 

 

 

Depreciation

1,450

3,320

 

 

Changes in Operating Assets and Liabilities-

 

 

 

 

   Accounts receivable

-

(4,050)

 

 

   Prepaid expenses

275

(1,000)

 

 

   Accounts payable and accrued liabilities

           8,260

            (7,227)

 

 

   Accounts payable - related party

          9,000

          23,477

 

 

   Payroll taxes payable

(516)

508

 

 

   Clients’ deposits

2,050

4,000

Net Cash Provided (Used) by Operating Activities

         (5,688)

          (26,942)

 

 

 

Investing  Activities:

 

 

     Acquisition of property and equipment

-

-

Net Cash Used in Investing Activities

-

-

 

 

 

Financing Activities:

 

 

 

Proceeds from issuance of common stock

-

6,350

Net Cash Provided by Financing Activities

          -

            6,350

Net Change in Cash

           (5,688)

(20,592)

Cash - Beginning of Period

                     5,748

                                28,695

Cash - End of Period

$                                  60

$                             8,103

 

 

 

 

Cash paid during the period for:

 

 

 

 

Interest

$                                    -

$                                    -

 

 

Income tax paid

$                                    -

$                                    -

 

 

 

Non Cash Financing and Investing Activities:

 

 

   Accrued compensation-officers-forgiven and contributed to capital

$                                    -

$                           31,000

   Restricted common stock canceled and proceeds contributed to capital

$                                    -

$                             2,750

  

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

  F-5

 


 

KINETIC GROUP INC.

NOTES TO THE JUNE 30, 2019 AND 2018 CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1 – Organization and Operations

 

Kinetic Group Inc., a Nevada corporation, (the “Company”) was formed under the laws of the State of Nevada on June 6, 2014.  Kinetic Group Inc. is a full service integrated digital marketing agency. The company offers a full range of web services, including web marketing services, social and viral marketing campaigns, search engine optimization consulting, custom web design, website usability consulting and web analytics implementation. The Company generate revenue from sales of its marketing services made directly to small and medium business customers.

 

 On March 23, 2018, the Company formed a wholly owned subsidiary, Kinetic Development Inc., an Ontario, Canada Corporation (“KDI”).  The subsidiary was incorporated to facilitate payroll transactions for the employees.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation – Unaudited Interim Financial Information

 

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended September 30, 2018 and notes thereto contained in the information as part of the Company’s Annual Report on the Form 10-K filed with Securities and Exchange Commission on November 15, 2018.

 

Principle of consolidation

 

The accompanying consolidated financial statements include all of the accounts of the Company as of June 30, 2019 and 2018 and as of September 30, 2018. KDI is included as of June 30, 2019 and 2018, and for the period from March 23, 2018 (date of formation) through September 30, 2018.  All intercompany balances and transactions have been eliminated.

 

Development Stage company

 

Kinetic Group Inc. is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification.  Although the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing the business.  All losses accumulated since Inception (June 4, 2014) have been considered as part of the Company’s development stage activities.

 

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.

 

The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

 

 

F-6

 


 

For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Kinetic Group has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.

 

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions


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(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

 

(i)

Assumption as a going concernManagement assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

(ii)

Allowance for doubtful accountsManagement’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.

 

(iii)

Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors;

 

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

 

Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.

 

 

 

 F-7

 


 

To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1

      

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2

 

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3

 

Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses, approximate their fair value because of the short maturity of those instruments. 

 

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 

Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.

 

Property and Equipment

 

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized.  Maintenance and repairs are charged to operations as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives, which range from five (5) years for computer equipment to seven (7) years for office furniture.  Upon sale or retirement of office equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include: a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

 

F-8

 


 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements.

 

The disclosures shall include:  a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Commitments and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. 

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.  If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

Revenue Recognition

 

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

The Company derives its revenues from sales contracts with its customer with revenues being generated upon rendering of services.  Persuasive evidence of an arrangement is demonstrated via invoice; service is considered provided when the service is delivered to the customers; and the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.

 

A right of return exists for customers’ retainers that was received prior to commencement of services. If a customer cancels a service contract subsequent to the commencement date, the customer is entitled to a refund, except for services already provided.

 

Income Tax Provision

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. 

 

F-9

 


 

 

Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. 

 

Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

The Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. 

 

The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.  Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Uncertain Tax Positions

 

The Company did not take any uncertain tax positions and had no unrecognized tax liabilities or benefits in accordance with the provisions of Section 740-10-25 at June 30, 2019 and 2018.

 

Earnings per Share

 

Earnings Per Share is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share.  Earnings per share ("EPS") is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period.  Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income.  The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

 

Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder.  The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied.

 

F-10

 


 

 

Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260–10–55–23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS.  Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.

 

There were no potentially debt or equity instruments issued and outstanding at any time during the periods ended June 30, 2019 and 2018.

 

Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. 

 

Recently Issued Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, will have a material effect on the accompanying financial statements.

 

Note 3 – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As reflected in the accompanying financial statements, the Company had accumulated deficit at June 30, 2019, which raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is attempting to generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. 

 

Management intends to raise additional funds by way of a private or public offering.  While the Company believes in the viability of its strategy to continue operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

 

 

F-11

 


 

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

 

Note 4 – Property and Equipment

 

Property and equipment at June 30, 2019 and September 30, 2018 consisted of the following:

 

 

Estimated

Useful Lives

(Years)

 

June 30,

2019

 

September 30,

2018

 

 

 

 

 

 

  Computer equipment

5

 

$                   5,832   

 

$                      5,832   

         Less accumulated depreciation

 

 

(5,673)  

 

(4,223)  

        Computer equipment, net

 

 

                            159 

 

                        1,609

  Software

1

 

                           2,495

 

   2,495

         Less accumulated amortization

               

 

(2,495)  

 

                        (2,495)  

        Software, net

 

 

                         -

 

                          -

  Total property and equipment, net

 

 

  $                      159  

 

$                      1,609   

 

Depreciation expense

 

Depreciation expense for the nine-months ended June 30, 2019 and the year ended September 30, 2018 was $1,450 and $4,012, respectively.

 

Note 5 – Related Party Transactions

 

Consulting services from President, Chief Executive Officer, Secretary and Treasurer and Chief Financial Officer

 

Consulting services provided by the President, Chief Executive Officer, Secretary and Treasurer and Chief Financial Officer for the nine months ended June 30, 2019 and the year ended September 30, 2018 were as follows:

 

 

 

For the

Nine Months

Ended

June 30, 2019

 

For the

Year

Ended

September 30, 2018

 

President, Chief Executive Officer

$

4,500

 

$

6,000

 

Former President

 

-

 

 

26,452

 

Chief Financial Officer, Secretary and Treasurer

 

4,500

 

 

6,000

 

 

$

9,000

*

$

38,452

*

 * - During the nine-month period ended June 30, 2019, $4,200 of these related parties consulting services was recognized in cost of revenues and $4,800 in officers’ compensation within operating expenses. During the year ended September 30, 2018, $7,800 of these related parties consulting services was recognized in cost of revenues and $30,652 in officers’ compensation within operating expenses.

 

Debt Settlement

 

As of March 31, 2018 the Company owed to the Company’s officers, Mr. Yaroslav Startsev and Mr. Nikolai Kuzmin, Thirty One Thousand Dollars ($31,000) (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its officers. The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective March 31, 2018.

 

 

 F-12

 

 


 

As of September 28, 2018 the Company owed to the Company’s former President, Mr. Timothy Barker, Twenty Six Thousand Four Hundred Fifty One Dollar and 61 Cents ($26,451.61) (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its President. The Company’s former President agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective September 28, 2018.

 

These Debt settlements improved the Company’s financial position and increased its working capital. The Company’s current and former officers released and forever discharged the Company, its successors and assigns from all manner of actions, suits, debts due, accounts, bonds, contracts, claims and demands whatsoever which against the Company they ever had or now have in connection to the Debt.

 

Accounts Payable – Related Parties

 

As of June 30, 2019 and September 30, 2018 the Company owed its directors and officers $15,025 and $6,025 respectively. These amounts represent unpaid consulting fees as of the end of the reporting period.

 

Note 6 – Stockholders’ Equity (Deficit)

 

Shares authorized

 

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par value $0.001 per share.

 

Unregistered shares of common stock 

 

In August 2015, the Company sold 2,750,000 shares of its common stock at par to its directors for $2,750 in cash.

  

On March 27, 2018 the Board of Directors of the Company approved the Stock Cancellation Agreements with Yaroslav Startsev (1,500,000 shares) and Nikolai Kuzmin (1,250,000 shares) canceling their shares with the Company in exchange for the Company agreeing to accept new subscription agreements.   The Company retained the subscription funds paid by Yaroslav Startsev and Nikolai Kuzmin for the cancelled shares of Common Stock as contributed capital to the Company.

 

As of March 28, 2018, the Company received subscription agreements and subscription funds representing an aggregate of 1,300,000 shares of Common Stock from Yaroslav Startsev for $1,300 and 1,050,000 shares of Common stock from Nikolai Kuzmin for $1,050 which certificates shall bear an appropriate restricted legend under the Securities Act of 1933, as amended.

 

As of March 28, 2018 the Company also received a subscription agreement and subscription funds from Timothy Barker, former President of the Company, representing 400,000 shares of Common Stock for $400 which shall bear an appropriate restricted legend under the Securities Act of 1933 as amended.

 

The above transactions were undertaken to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company.  The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.

 

The following table represents a summary of the restricted stock cancellation and issuance during the year ended September 30, 2018:

 

 

 

Balance

Number of Shares

Balance

Title of Class

Name and Title of Beneficial Owner

September 30,

2017

Canceled

Issued

September 30, 2018

Common 

T.Barker, former President

                             -

-

        400,000

              400,000

Common 

Y.Startsev, President ,C.E.O.

                   1,500,000

    (1,500,000)

     1,300,000

           1,300,000

Common

N.Kuzmin, C.F.O.

                   1,250,000

    (1,250,000)

     1,050,000

           1,050,000

 

Total Number of Shares:

                2,750,000

  (2,750,000)

   2,750,000

         2,750,000

 

 

F-13

 

 


 

In September 2018 the Company issued 100,000 restricted shares of common stock at a price of $0.02 per share for consulting services related to business development provided by a third party.

 

Registered shares of common stock 

 

During the year ended September 30, 2017, the Company’s Registration Statement on the Form S-1 filed with the Securities and Exchange Commission was declared effective. In April 2017, the Company completed the sale of 2,030,000 shares of common stock at $0.0175 per share for total proceeds of $35,525 pursuant to this Registration Statement.

 

 Regulation D Offering

 

On April 9, 2018 the Company filed with the Securities and Exchange Commission a notice of an exempt offering of the Company’s securities on the Form D (the “Offering”). The Company is offering 10,000,000 Shares under the Offering at a price of $0.02 per Share for an aggregate Offering price of US $200,000.  The Securities are being offered by the Company through its officers and directors on a "best efforts" basis, pursuant to a non-public offering exemption from the registration requirements imposed by the Securities Act of 1933, under Regulation D, Rule 506, as amended ("1933 Act"). The Securities are not being registered and may not be sold unless they are registered under applicable Federal and State securities laws or an exemption from such laws is available. 

 

This Offering was closed on August 21, 2018. The Company sold 180,000 shares of common stock for total proceeds of $3,600 pursuant to this Offering.

 

Note 7 – Subsequent Events

 

In accordance with ASC 855-10 we have analyzed our operations subsequent to June 30, 2019 to August 14, 2019, the date of these financial statement were issued, and have determined that we do not have any material subsequent events to disclose in these financial statements other than the events discussed above.

 

 

 

 

F-14

 

 


 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Forward-Looking Statements and Associated Risks.

 

The following discussion should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Quarterly Report on Form 10-Q.

 

Our Business

 

Kinetic Group Inc., a Nevada corporation, was formed under the laws of the State of Nevada on June 6, 2014.  Kinetic Group is a full service integrated digital marketing agency. The company offers a range of web services, including web marketing services, social media services, search engine management, custom web design and development, including social media and content management solutions. We build digital strategies that help our clients to have fruitful dialogues with their audiences, whether targeted or non-targeted. We provide consulting on a wide variety of issues, from selection of domain name registrars and hosting providers, to the most cost-efficient and effective marketing strategies.

 

On March 23, 2018, the Company formed a wholly owned subsidiary, Kinetic Development Inc., an Ontario, Canada Corporation (“KDI”).  The subsidiary was incorporated to facilitate payroll transactions for the employees. The accompanying consolidated financial statements include all of the accounts of the Company as of September 30, 2018 and 2017. KDI is included as of June 30, 2019 and 2018 and for the period from March 23, 2018 (date of formation) through September 30, 2018.  All intercompany balances and transactions have been eliminated.

 

Kinetic Group Inc. is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification.  Although the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing the business.  All losses accumulated since Inception (June 6, 2014) have been considered as part of the Company’s development stage activities.

 

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.

 

The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

 

For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Kinetic Group has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.

 

 

18

 

 


 

Our Digital Marketing Services

 

We offer a wide variety of integrated digital marketing services to our clients. Our services include web design and development, organic search engine optimization (Organic SEO), pay-per-click (PPC) management, content creation and marketing, e-mail marketing and social media marketing.

 

Web Design and Development

 

We offer custom website design services, whether it is front-end design, or a full end-to-end web development project. Our management, as well as our freelance website design team, is composed of experienced web design and creation professionals and graphic designers who create customized websites tailored to the needs and goals of our customers. We engage, when necessary, additional designers and developers for each individual project as an addition to our management team.

 

Organic Search Engine Optimization (Organic SEO).

Search results for websites that use organic SEO will grow, expand, and adapt over time in response to readers' desires. Although black hat SEO methods, such as hidden text, cloaking, and blog comment spam, may boost a website’s search engine page rank in the short term, these methods could also get the site banned from the search engines altogether.

Organic SEO can be achieved by:

 

  • optimizing the web page with relevant content,
  • spreading links pointing to the web site’s content, and
  • incorporating metatags and other types of tag attributes.

 

Organic SEO methods mainly rely on the relevancy of the content they offer. Some of the benefits of organic SEO include:

 

  • generating more clicks as the organically optimized sites offer relevant content related to the keywords searched for,
  • building greater trust among the site’s users, and
  • being cost-effective when compared to paid listings.

 

Pay-Per-Click (PPC) management.

 

Pay-per-click (PPC), also known as cost-per-click (CPC), is an internet advertising model used to direct traffic to websites, in which an advertiser pays a publisher (typically a website owner or a network of websites) whenever the ad is clicked on. Search engines, such as Google and Bing, allow businesses and individuals to buy listings in their search results. These listings appear above the non-paid organic search results. The search engine is then paid every time a user clicks on the sponsored listing.

 

Pay-per-click advertising can generate traffic right away. It is a simple strategy: spend enough on PPC advertisement and get top placement when people execute relevant searches. Potential customers will see the business first when executing a relevant search as it will appear at the top of the search results page. However, PPC advertising can run up costs extremely quickly. It is easy to get caught up in a bidding war over a particular keyword and end up spending far more than your potential return. ‘Ego-based’ bidding, where a business or a marketing agency decides they must be at the top of the results may cause the client to spend too much money. Another concern with PPC is that there is constant bid inflation, which raises the per-click cost for highly-searched phrases.

 

19

 


 

If a client has a short-term campaign for a new product, service, or special issue, pay-per-click can be a great way to generate buzz quickly. We can start a pay-per-click campaign within 24-48 hours, and the client can generally change the text of the advertisement at any time, allowing the client to adjust the advertisement’s message easily. If the client needs to bring potential customer attention to a new product or service for a finite amount of time, PPC is one effective way to achieve this goal.

 

Social Media and Blogs

We help our clients build their customer base by helping them cultivate a strong online presence. Corporate blogs allow brands to engage with existing and potential customers, to improve their search engine rankings and to create a community of posters through the comments section. Currently, our directors provide blog design services. In addition, when a short-term project requires a specific set of skills, we engage freelance designers through online talent recruitment tools, such as www.upwork.com and LinkedIn. We also use freelance researchers, bloggers, and writers to research relevant news and information about our clients, industries and businesses. Our freelance writers create blog posts, tweets, and news comments that are posted on relevant social media and news websites. We customize the design, content and message to appeal to the target audience for our clients’ brand. Our social media services include:
-        Social Media Strategy
-        Social Media Campaigns
-        Blogging
-        Visual Social Media Posts/Campaigns
-        Strategic Monitoring
-        Reporting and Analysis

 

Currently, we have limited workforce and financial resources and are not able to take on labor-intensive projects. As a result, we cannot guarantee that we will be successful in our efforts to attract new customers and expand our operations. Failure to achieve a sustainable sales level will cause us to go out of business.

 

Results of operations for the three-month periods ended June 30, 2019 and 2018.

 

Revenue

 

Our gross revenue from consulting services related to website development, SEO consulting and online marketing services for the three-month periods ended June 30, 2019 and 2018 was $1,500 and $16,000 respectively. Our cost of revenues for the three-month period ended June 30, 2019 was $750 (June 30, 2018: $2,800) resulting in a gross profit of $750 (June 30, 2018: $13,200).

 

Costs and Expenses

 

The major components of our expenses for the three-month periods ended June 30, 2019 and 2018 are outlined in the table below:

 

 

For the Three Months

 Ended

June 30, 2019

 

 

For the Three Months

 Ended

June 30, 2018

 

Increase

(Decrease)

 

 

 

 

 

 

Compensation - officers

$                          2,250

 

$                          13,050

 

$            (10,800)

Professional fees

3,500

 

4,500

 

(1,000)

Salaries

-

 

9,710

 

(9,710)

General and administrative

4,372

 

12,478

 

(8,106)

 

$                        10,122

 

$                         39,738

 

$            (29,616)

 

 

20

 

 


 

The decrease in our operating costs for the three months ended June 30, 2019, compared to the same period in our fiscal 2018, was mainly due to a decrease in officers’ compensation, salaries, professional fees and general and administrative expenses.

 

General and administrative expenses of $4,372 ( June 30, 2018: $12,478) incurred during the three months ended June 30, 2019 consisted of filing fees of $745 (June 30, 2018: $1,065), accounting fees of $2,000 (June 30, 2018: $2,000), depreciation expense of $484 (June 30, 2018: $1,107), office expenses of $595 (June 30, 2018: $867), office rent of $0 (June 30, 2018: $721), travel expenses of $0  (June 30, 2018: $5,357), transfer agent fees of $297 (June 30, 2018: $632), foreign exchange $22 (June 30, 2018: $384) and bank charges of $229 (June 30, 2018: $345). The decrease in general and administrative expenses was primarily due to the decrease in filing fees of $320, depreciation expense of $623, office rent and expenses of $993, foreign exchange of $362, bank charges of $116, travel expenses of $5,357, and transfer agent fees of $335.

 

During the three-month periods ended June 30, 2019 and 2018 the Company incurred $3,000 in total in management consulting services with the Company’s chief executive officer and the chief financial officer. A portion of consulting services for the three-month period ended June 30, 2019  directly related to sales provided by the chief executive officer of the Company of $750 (June 30, 2018: $1,950) was recognized in cost of revenues and $2,250 (June 30, 2018: $1,050) in officer’s compensation within operating expenses.

 

 

Results of operations for the nine-month periods ended June 30, 2019 and 2018.

 

Revenue

 

Our gross revenue from consulting services related to website development, SEO consulting and online marketing services for the nine-month periods ended June 30, 2019 and 2018 was $10,350 and $41,950 respectively. Our cost of revenues for the nine-month period ended June 30, 2019 was $4,200 (June 30, 2018: $8,500) resulting in a gross profit of $6,150 (June 30, 2018: $33,450).

 

Costs and Expenses

 

The major components of our expenses for the nine-month periods ended June 30, 2019 and 2018 are outlined in the table below:

 

 

For the Nine Months

 Ended

June 30, 2019

 

 

For the Nine Months

 Ended

June 30, 2018

 

Increase

(Decrease)

 

 

 

 

 

 

Compensation - officers

$                           4,800

 

$                         17,602

 

$            (12,802)

Professional fees

14,350

 

12,150

 

2,200

Salaries

-

 

12,957

 

(12,957)

General and administrative

13,207

 

36,711

 

(23,504)

 

$                         32,357

 

$                         79,420

 

$            (47,063)

 

The decrease in our operating costs for the nine months ended June 30, 2019, compared to the same period in our fiscal 2018, was mostly due to the decrease in officers’ compensation, consulting fees, salaries and travel expenses.

 

 

21

 

 


 

General and administrative expenses of $13,207 (June 30, 2018: $36,711) incurred during the nine months ended June 30, 2019 consisted of filing fees of $2,145 (June 30, 2018: $3,275), accounting fees of $6,500 (June 30, 2018: $6,000), depreciation expense of $1,450 (June 30, 2018: $3,320), office expenses of $681 (June 30, 2018: $1,356), office rent of $470 (June 30, 2018: $1,470), travel and promotion expenses of $0  (June 30, 2018: $10,859), transfer agent fees of $936 (June 30, 2018: $1,226), consulting of $0  (June 30, 2018: $8,000), subsidiary incorporation costs $0 (June 30, 2018: $279), foreign exchange $283 (June 30, 2018: $348),  and bank charges of $742 (June 30, 2018: $578).

 

Consulting services from President, Chief Executive Officer, Secretary and Treasurer and Chief Financial Officer

 

Consulting services provided by the President, Chief Executive Officer, and Chief Financial Officer, Secretary and Treasurer for the nine months ended June 30, 2019 and the year ended September 30, 2018 were as follows:

 

  

 

 

For the

Nine Months

Ended

June 30, 2019

 

For the

Year

Ended

September 30, 2018

 

 

 

 

 

 

 

 

President, Chief Executive Officer

$

4,500

 

$

6,000

 

Former President

 

-

 

 

26,452

 

Chief Financial Officer, Secretary and Treasurer

 

4,500

 

 

6,000

 

 

$

9,000

*

$

38,452

*

 * - During the nine-month period ended June 30, 2019, $4,2000 of these related parties consulting services was recognized in cost of revenues and $4,800 in officers’ compensation within operating expenses. During the year ended September 30, 2018, $7,800 of these related parties consulting services was recognized in cost of revenues and $30,652 in officers’ compensation within operating expenses.

 

Debt Settlement

 

As of March 31, 2018 the Company owed to the Company’s officers, Mr. Yaroslav Startsev and Mr. Nikolai Kuzmin, Thirty One Thousand Dollars ($31,000) (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its officers. The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective March 31, 2018.

 

As of September 28, 2018 the Company owed to the Company’s former President, Mr. Timothy Barker, Twenty Six Thousand Four Hundred Fifty One Dollar and 61 Cents ($26,451.61) (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its President. The Company’s former President agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective September 28, 2018.

 

These Debt settlements improved the Company’s financial position and increased its working capital. The Company’s current and former officers released and forever discharged the Company, its successors and assigns from all manner of actions, suits, debts due, accounts, bonds, contracts, claims and demands whatsoever which against the Company they ever had or now have in connection to the Debt.

 

Accounts Payable – Related Parties

 

As of June 30, 2019 and September 30, 2018 the Company owed its directors and officers $15,025 and $6,025 respectively. These amounts represent unpaid consulting fees and cash advances as of the end of the reporting period.

 

 

22

 

 


 

Liquidity and Capital Resources

 

 

 

As of

 

As of

 

 

June 30,

 

September 30,

 

 

2019

 

2018

 

 

 

 

 

Total current assets

$

                   60

$

                 5,748

Total current liabilities

 

                   (47,211)

 

              (28,417)

Working capital (deficiency)

$

(47,151)

$

                   (22,669)

 

Liquidity

 

Our internal liquidity is provided by our operations. During the nine-month periods ended June 30, 2019 and 2018 the Company reported net loss from operations of $26,207 and $45,970, respectively.

To date we have financed our operations by cash generated from sales of our services and shares of our common stock. We were able to sustain our operations by increasing the number of our clients.

 

In August 2015, we sold 2,750,000 shares of common stock at $0.001 per share to our directors for total proceeds of $2,750. During the six months ended March 31, 2018 the Company’s Board of Directors has appointed new President of the Company. The Company has cancelled the restricted shares of common stock issued to the company’s two directors in 2015 as per Share Cancellation Agreements and issued new 2,750,000 restricted shares of common stock to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company. The Company has received $2,750 from the officer and directors of the Company for the restricted stock issued in March of 2018 and recorded $2,750 received from the Company’s directors in 2015 as contributed capital.

 

The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.

 

During the year ended September 30, 2017, the Company’s Registration Statement on the Form S-1 filed with the Securities and Exchange Commission was declared effective. In April 2017, the Company completed the sale of 2,030,000 shares of common stock at $0.0175 per share for total proceeds of $35,525 pursuant to this Registration Statement.

 

On April 9, 2018 the Company filed with the Securities and Exchange Commission a notice of an exempt offering of the Company’s securities on the Form D (the “Offering”). The Company is offering 10,000,000 Shares under the Offering at a price of $0.02 per Share for an aggregate Offering price of US $200,000.  The Securities are being offered by the Company through its officers and directors on a "best efforts" basis, pursuant to a non-public offering exemption from the registration requirements imposed by the Securities Act of 1933, under Regulation D, Rule 506, as amended ("1933 Act"). The Securities are not being registered and may not be sold unless they are registered under applicable Federal and State securities laws or an exemption from such laws is available. 

 

This Offering was closed on August 21, 2018. The Company sold 180,000 shares of common stock for total proceeds of $3,600 pursuant to this Offering.

 

If we are not successful in expanding our client base, maintaining profitability and positive cash flows, additional capital may be required to maintain ongoing operations. We have explored, and are continuing to explore, options to provide additional financing to fund future operations, as well as other possible courses of action. Such actions include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders), loans and cash advances from our directors or other third parties, and other similar actions.

 

23

 


 

There can be no assurance that we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, our directors, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.

 

Cash Flows

 

The table below, for the period indicated, provides selected cash flow information:

 

 

 

For the Nine Months

Ended

June 30, 2019

 

For the Nine Months

Ended

June 30, 2018

 

 

 

 

 

Net cash provided (used) by operating activities

$

(5,688)

$

(26,942)

Cash used in investing activities

 

-

 

-

Cash provided by financing activities

 

-

 

6,350

Net change in cash

$

(5,688)

$

(20,592)

 

We have generated revenues of $10,350 and $41,950 during the nine-month periods ended June 30, 2019 and 2018, respectively.

 

Cash Flows from Operating Activities

 

Our cash provided (used) by operating activities as of June 30, 2019 of $(5,688) (March 31, 2018: $(26,942)) is a net result of cash generated from sales of our marketing, SEO consulting and web development services, and changes in our current assets and liabilities.

 

This portion of our cash flow represents the most significant source of funding for our operations during the nine-month period ended June 30, 2019. The major uses of our operating cash include funding general operating expenses (professional fees, regulatory filings, office expenses and office rent) and cost of revenues.

 

Cash flows resulting from changes in assets and liabilities for the nine-month period ended June 30, 2019, include an increase in accounts payable of $8,260 and in accounts payable due to related party of $9,000 and a decrease in prepaid expenses of $275 and payroll taxes payable of $516. In addition, we received client’s retainer of $3,550.

 

The increase in accounts payable is a net result of operating expenses incurred during the nine-month period and payments made by the company to its vendors during the same period. The increase in the amounts due to related parties is a net result of the accrued officers’ compensation during the nine-month period ended June 30, 2019 that remained unpaid as at the end of this period. The decrease in payroll taxes payable is due to the payroll deductions collected by the Company’s at the end of our fiscal 2018 and remitted during the nine months ended June 30, 2019.

 

Cash flows resulting from changes in assets and liabilities for the nine-month period ended June 30, 2018, include an increase in accounts receivable of $4,050, an increase in clients’ deposits of $4,000, an increase in payroll taxes payable of $508, an increase in accounts payable do to related party of $23,477 and a decrease in accounts payable of $7,227. The increase in accounts receivable was due to the unpaid fees for web development and SEO consulting outstanding as of June 30, 2018.

 

 

24

 


 

The increase in clients’ deposits payable was due to a retainer for the web development and brand strategy consulting services received by the company in March of 2018. The decrease in accounts payable is a net result of operating expenses incurred during the quarter and payments made by the company to its vendors during the same period. The increase in the amounts due to related parties is a net result of the accrued officers’ compensation, debt settlement and cash advances provided by the Company’s director during the nine-month period ended June 30, 2018 that remained unpaid as at the end of this period. The increase in payroll taxes payable is due to the payroll deductions collected by the Company’s at the end of the reporting period that were remitted subsequent to June 30, 2018.

 

Debt Settlement

 

As of March 31, 2018 the Company owed to the Company’s officers, Mr. Yaroslav Startsev and Mr. Nikolai Kuzmin, Thirty One Thousand Dollars ($31,000) (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its officers.

 

The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective March 31, 2018. This Debt settlement improved the Company’s financial position and increased its working capital.

 

 

Cash Flows from Investing Activities

 

We did not generate any cash from investing activities during the nine-month periods ended June 30, 2019 and 2018.

 

Cash Flows from Financing Activities

 

We did not generate any cash from financing activities during the nine-month period ended June 30, 2019.

 

In August 2015, the Company sold 2,750,000 shares of its common stock at par to its directors for $2,750 in cash.

  

On March 27, 2018 the Board of Directors of the Company approved the Stock Cancellation Agreements with Directors of the Company, Yaroslav Startsev (1,500,000 shares) and Nikolai Kuzmin (1,250,000 shares), canceling their shares with the Company issued in 2015 in exchange for the Company agreeing to accept new subscription agreements.   The Company retained the subscription funds paid by Yaroslav Startsev and Nikolai Kuzmin for the cancelled shares of Common Stock as contributed capital to the Company.

 

As of March 28, 2018, the Company received subscription agreements and subscription funds representing an aggregate of 1,300,000 shares of Common Stock from Yaroslav Startsev for $1,300 and 1,050,000 shares of Common stock from Nikolai Kuzmin for $1,050 which certificates shall bear an appropriate restricted legend under the Securities Act of 1933, as amended.

 

As of March 28, 2018 the Company also received a subscription agreement and subscription funds from the Company’s former President Timothy Barker representing 400,000 shares of Common Stock for $400 which shall bear an appropriate restricted legend under the Securities Act of 1933 as amended.

 

The above transactions were undertaken to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company.  The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.

 

 

25

 


 

 Regulation D Offering

 

On April 9, 2018 the Company filed with the Securities and Exchange Commission a notice of an exempt offering of the Company’s securities on the Form D (the “Offering”). The Company is offering 10,000,000 Shares under the Offering at a price of $0.02 per Share for an aggregate Offering price of US $200,000.  The Securities are being offered by the Company through its officers and directors on a "best efforts" basis, pursuant to a non-public offering exemption from the registration requirements imposed by the Securities Act of 1933, under Regulation D, Rule 506, as amended ("1933 Act"). The Securities are not being registered and may not be sold unless they are registered under applicable Federal and State securities laws or an exemption from such laws is available. 

 

As of June 30, 2018 the Company sold 180,000 shares of common stock for total proceeds of $3,600 pursuant to this Offering.

 

 

Recent Accounting Pronouncements 

 

See Note 2 to the Unaudited Financial Statements.

 

Off Balance Sheet Arrangements

 

As of June 30, 2019 we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report.  Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.

 

Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date.  We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken.

 

 

26

 


 

PART II – OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS.

 

We were not subject to any legal proceedings during the nine-month periods ended June 30, 2019 and 2018, and currently we are not involved in any pending litigation or legal proceeding.

 

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

In August 2015, we sold 2,750,000 shares of common stock at $0.001 per share to our directors for total proceeds of $2,750. During the nine months ended June 30, 2018 the Company’s Board of Directors has appointed new President of the Company. The Company has cancelled the restricted shares of common stock issued to the company’s two directors in 2015 as per Share Cancellation Agreements and issued new 2,750,000 restricted shares of common stock to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company.

 

The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.

 

The Company has received $2,750 from the officer and directors of the Company for the restricted stock issued in March of 2018 and recorded $2,750 received from the Company’s directors in 2015 as contributed capital.

 

On April 9, 2018 the Company filed with the Securities and Exchange Commission a notice of an exempt offering of the Company’s securities on the Form D (the “Offering”). The Company was offering 10,000,000 Shares under the Offering at a price of $0.02 per Share for an aggregate Offering price of US $200,000.  As of June 30, 2018 the Company sold 180,000 shares of common stock for total proceeds of $3,600 pursuant to this Offering.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

No senior securities were issued and outstanding during the nine-month periods ended June 30, 2019 and 2018.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable to our Company.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

 

27

 

 


 

ITEM 6. EXHIBITS
 
The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

 

EXHIBIT

NUMBER        DESCRIPTION

 

3.1

 

Articles of Incorporation. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.

3.2

 

Bylaws. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.

4.2

 

Subscription Agreement. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.

10.1

 

Management Consultant Agreement (C.E.O). Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.

10.2

 

Management Consultant Agreement (C.F.O.). Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.

31.1

 

Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2

 

Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

 

Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2

 

Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS 

 

XBRL Instance Document **

101.SCH 

 

XBRL Taxonomy Extension Schema Document **

101.CAL 

 

XBRL Taxonomy Extension Calculation Linkbase Document **

101.DEF 

 

XBRL Taxonomy Extension Definition Linkbase Document **

101.LAB 

 

XBRL Taxonomy Extension Label Linkbase Document **

101.PRE 

 

XBRL Taxonomy Extension Presentation Linkbase Document **

 

   * Filed herewith.

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

SIGNATURES

 

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 14, 2019

 

 

KINETIC GROUP INC.

 

 

 

 

By:

/s/  Yaroslav Startsev

 

 

Yaroslav Startsev

 

 

Chief Executive Officer (Principal Executive Officer) and Director

 

 

28

 

 


 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of Kinetic Group Inc. and in the capacities and on the dates indicated.

 

SIGNATURES

 

TITLE

 

DATE

 

 

 

 

 

 

 

 

 

 

/s/ Yaroslav Startsev

 

President, C.E.O. and Director

 

August 14, 2019

Yaroslav Startsev

 

 

 

 

 

 

/s/ Nikolai Kuzmin

 

Treasurer, Secretary, C.F.O., Principal Accounting Officer, Principal Financial Officer and Director

 

 

 

August 14, 2019

Nikolai Kuzmin

 

 

 

 

 

 

 

 

 

 

 

29