UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-q

 

x   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended:  March 31, 2016

 

OR

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from                      to

 

Commission file number: 333-190836

 

KEY LINK ASSETS CORP.

(Exact Name of Registrant as Specified in Charter)

 

Delaware   27-3439423
(State or other jurisdiction   (IRS Employer
of incorporation)   Identification No.)

 

216 South Jefferson, Suite LL1

Chicago, IL  60661

(Address of Principal Executive Offices)
 
(312) 965-9637
(Registrant's Telephone Number, Including Area Code)
 
 
(Former Name or Former Address, if Changed Since Last Report)

 

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 (§232.405 of this chapter) during the preceding 12 months (or for 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 x No ¨

 

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

 

Common Stock: 14,702,250 shares outstanding as of May 9, 2016.

 

 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION  
     
  Item 1. Financial Statements 3
     
  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
     
  Item 3. Quantitative and Qualitative Analysis About Market Risk 11
     
  Item 4. Controls and Procedures 11
     
PART II – OTHER INFORMATION  
     
  Item 1. Legal Proceedings 13
     
  Item 1A. Risk Factors 13
     
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
     
  Item 3. Defaults Upon Senior Securities 13
     
  Item 4. Mine Safety Disclosures 13
     
  Item 5. Other Information 13
     
  Item 6. Exhibits 13
     
Signatures 15

 

 2 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.            FINANCIAL STATEMENTS (UNAUDITED)

 

The accompanying unaudited financial statements of Key Link Assets Corp. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (“Commission” or “SEC”). While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary in order to make the financial statements not misleading and for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

 3 

 

 

KEY LINK ASSETS CORP.

BALANCE SHEETS

(UNAUDITED)

 

   March   December 
   31, 2016   31, 2015 
ASSETS          
Current assets          
Cash  $68   $- 
Total current assets   68    - 
           
Total assets  $68   $- 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities          
Accounts payable  $98,573   $93,877 
Total current liabilities   98,573    93,877 
           
Long term liabilities          
Note payable - shareholder   39,612    36,662 
Note payable - other   34,541    34,541 
    74,153    71,203 
           
Total liabilities   172,726    165,080 
           
Commitments and contingencies          
           
Stockholders' deficit          
Preferred stock - 25,000,000 preferred shares authorized with a par value of $0.0001; no shares outstanding as of March 31, 2016 and December 31, 2015   -    - 
Common stock - 100,000,000 common shares authorized with a par value of $0.0001; 14,702,250 common shares issued and outstanding as of March 31, 2016 and December 31, 2015   1,470    1,470 
Additional paid in capital   58,941    58,941 
Accumulated Deficit   (233,069)   (225,491)
Total stockholders' deficit   (172,658)   (165,080)
           
Total liabilities and stockholders' deficit  $68   $- 

 

The accompanying notes are an integral part of the financial statements.

 

 4 

 

 

KEY LINK ASSETS CORP.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   Three months ending 
   March   March 
   31, 2016   31, 2015 
         
Operating expenses          
           
General and administrative  $7,578   $2,168 
Total operating expenses   7,578    2,168 
           
Operating loss   (7,578)   (2,168)
           
Net loss  $(7,578)  $(2,168)
           
Basic and diluted loss per share  $(0.00)  $(0.00)
           
Weighted average number of common shares outstanding   14,702,250    14,702,250 

 

The accompanying notes are an integral part of the financial statements.

 

 5 

 

 

KEY LINK ASSETS CORP.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Three months ending 
   March   March 
   31, 2016   31, 2015 
Cash flows from          
Operating activities          
Net loss  $(7,578)  $(2,168)
Adjustments to reconcile net loss to net cash used in operating activities          
Changes in operating assets and liabilities Accounts payable   4,696    (1,625)
Net cash used in operating activities   (2,882)   (3,793)
           
Cash flows from          
Financing Activities          
Proceeds from shareholder loans   2,950    3,792 
Net cash provided by financing  activities   2,950    3,792 
           
Net change in cash   68    (1)
           
Cash at beginning of period   -    15 
Cash at end of period  $68   $14 
           
Supplemental information          
Cash paid for Interest  $-   $- 
Taxes  $-   $- 
Noncash transactions          
Conversion of accounts payable to note payable   $-   $- 

 

The accompanying notes are an integral part of the financial statements.

 

 6 

 

 

KEY LINK ASSETS CORP.

NOTES TO FINANCIAL STATEMENTS

March 31, 2016

(Unaudited)

 

NOTE 1 – ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN CONSIDERATION

 

Key Link Assets Corp. (the "Company") was incorporated in the State of Delaware on May 13, 2010 for the purpose of acquiring a portfolio of heavily discounted real estate properties in the Chicago metropolitan area. The Company has changed its focus and now plans to acquire small and medium sized grocery stores in non-urban locales that are not directly served by large national supermarket chains.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of March 31, 2016, the Company had an accumulated deficit of $233,069, negative working capital of $98,505 and has earned no revenues since inception. The Company intends to fund its operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements.

 

The ability of the Company to continue is dependent upon, among other things, obtaining additional financing to continue operations, and the implementation of its business plan. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 2 – BASIS OF PRESENTATION

 

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2016, are not necessarily indicative of the results that may be expected for the year ended December 31, 2016.

 

NOTE 3 – NOTE PAYABLE OTHER

 

On September 29, 2013, a creditor of the Company converted accounts payable in the amount of $34,541 into a note payable. The note payable, which is due on June 30, 2017, is non-interest bearing and has no collateral. As of March 31, 2016 and December 31, 2015, the balance remains outstanding.

 

NOTE 4 – CAPITAL STOCK

 

Authorized Stock

 

The Company has authorized 100,000,000 common shares with a par value of $0.0001 per share and 25,000,000 preferred shares with a par value of $0.0001 per preferred share.  Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation is sought. The rights, preferences and restrictions of the preferred shares will be defined by the Company’s Board of Directors when and if the preferred shares are issued.

 

 7 

 

 

Forward Stock Split

 

In March 2016, the sole Director of the Company, by Written Consent, authorized the Company to execute a four-for-one forward stock split of its common shares. This action was subsequently approved by the Written Consent of shareholders who own a majority of the Company’s common stock. The Company has filed an application with the Financial Industry Regulatory Authority (“FINRA”) seeking approval for the forward stock split. As of the date of this report, the forward stock split has not been approved by FINRA.

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

As of March 31, 2016, Mr. Clark has loaned the Company $39,612. The notes payable, which are due on June 30, 2017, are non-interest bearing and have no collateral.

 

NOTE 6 – SUBSEQUENT EVENTS

 

On May 2, 2016, Foothills Petroleum, Inc., a Nevada corporation (“Foothills Exploration”), acquired in a private transaction 14,112, 250 shares of common stock of the Company from five shareholders, constituting approximately 96% of the outstanding capital stock of the Company from five shareholders (the “Acquisition Transaction”). Following the closing of the Acquisition Transaction, the Company appointed B.P. Allaire as a director and interim President and also appointed Alex Hemb and Christopher Jarvis as directors. Shawn Clark, sole director of the Company prior to the closing of the Acquisition Transaction, will remain a director of the Company.

 

 8 

 

 

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

 

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Report. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily occur. This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Report, our actual results may differ materially from those anticipated in these forward-looking statements.

 

Overview

 

On May 2, 2016, Foothills Petroleum, Inc., a Nevada corporation (“Foothills Exploration”), acquired in a private transaction 14,112, 250 shares of common stock of the Company from five shareholders, constituting approximately 96% of the outstanding capital stock of the Company from five shareholders (the “Acquisition Transaction”). Foothills Exploration is a development stage oil and gas exploration company formed in December 2015 that is engaged in acquiring, exploring, and developing oil and natural gas properties. Following the closing of the Acquisition Transaction, the Company appointed B.P. Allaire as a director and interim President and also appointed Alex Hemb and Christopher Jarvis as directors. Shawn Clark, sole director of the Company prior to the closing of the Acquisition Transaction, will remain a director of the Company. The Company disclosed the Acquisition Transaction in its Current Report on Form 8-K filed with the Commission on May 6, 2016.

 

The Company intends to acquire small and medium sized grocery stores that are the dominant presence in their non-urban markets. By acquiring stores that are situated in less competitive locales that are not directly served by large national supermarket chains, wholesale clubs and supercenters, the Company believes that it can achieve financial returns that meet or exceed industry norms because stores in less competitive locales will be under less pressure to heavily discount their prices. The acquisitions will be clustered regionally, which will allow the Company to centralize certain operational functions, including purchasing and marketing. The centralization of these functions should provide the consolidated stores with the critical mass and leverage to demand enhanced service and financial concessions from its distributors and marketing vendors.

 

We have not yet acquired any grocery stores under our business plan and have not begun operations.

 

Overall Outlook

 

Our main business emphasis will be on revenues from sales generated in our stores. Due to a number of factors affecting consumers, including among others the increasing Federal deficit, volatility in the stock market, the uncertain economic environment, all of which have resulted in reduced levels of consumer spending, the outlook for the supermarket industry remains highly unpredictable. Because of these uncertain conditions, we will need to focus on managing our operating margins. Our present objective is to manage our cost and expense structure to address the expected depressed business volumes and generate strong and stable cash flow. We will continually work to position our Company for greater success by strengthening our existing operations and growing through capital investment and other strategic initiatives.

 

Plan of Operation

 

We have not yet started operations or generated or realized any revenues from our business operations. The Company does not own any grocery stores and has no current plans, proposals or arrangements, written or otherwise, to acquire any grocery stores. The Company has not identified any potential acquisition targets.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months unless we obtain additional capital to pay our bills. As of March 31, 2016, we have an accumulated deficit of $233,069, we have not generated any revenues and no revenues are anticipated until we begin operating retail grocery establishments. Accordingly, we must raise cash from sources other than our operations. Our only other sources for cash at this time are commercial financings and additional sales of stock. Our success or failure will be determined by what additional financing we obtain and the success of our planned retail grocery establishments.

 

We have no employees at this time. We intend to hire employees and engage independent contractors as justified by the demands of the business and depending on the availability of funding.

 

 9 

 

 

Results of Operations

 

Comparison of Three-Month Periods Ended March 31, 2016 and March 31, 2015

 

Revenue

 

We have not earned any revenues for the three months ended March 31, 2016 and 2015. We can provide no assurance that we will commence operations or that such operations, if commenced, will be successful.

 

Operating Expenses

 

Operating expenses increased by $5,410, or 249.5%, from $2,168 for the quarter ended March 31, 2015 to $7,578 for the quarter ended March 31, 2016.

 

The increase in operating expenses is primarily related to the increase in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2016 when the Company completed the audit of its financial statements for the year ending December 31, 2015. The prior year audit was completed during the second quarter of 2015.

 

Operating Loss

 

Our operating loss represents an increase of $5,410 from an operating loss of $2,168 for the quarter ended March 31, 2015 compared to operating loss of $7,578 for the quarter ended March 31, 2016.

 

The increase in operating loss is primarily related to the increase in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2016 when the Company completed the audit of its financial statements for the year ending December 31, 2015. The prior year audit was completed during the second quarter of 2015.

 

Net Loss

 

Net loss increased by $5,410, or 249.5%, from a net loss of $2,168 for the quarter ended March 31, 2015 to net loss of $7,578 for the quarter ended March 31, 2016.

 

The increase in net loss is primarily related to the increase in accounting, professional and Edgar conversion fees that were incurred during the first quarter of 2016 when the Company completed the audit of its financial statements for the year ending December 31, 2015. The prior year audit was completed during the second quarter of 2015.

 

Liquidity and Capital Resources

 

Since inception, we have raised $59,000 through the sale of our common stock and have incurred expenses of $233,069. Our projected financial requirements for the next 12 months are $163,500.

 

Our initial financial requirements will be funded by a public or private offering of securities, commercial financing, loan from officers or directors or a combination of these means. We have not yet made plans to conduct a securities offering, obtain commercial financing or a private loan. The Company does not have any commitments or arrangements to obtain any such funds and there can be no assurance that required financing will be available to the Company on acceptable terms, if at all. The unavailability of additional financing could prevent or delay the implementation of the Company’s business plan and may require the Company to curtail or terminate its operations. If sufficient financing is unavailable, the Company will defer non-essential operating expenses until sufficient funds become available. We will not begin to implement our business plan until we have secured the funds necessary to commence operations. The Company is in its development stage and has not begun operations. As such, the Company has no historical periods with which to compare anticipated capital requirements in the future.

 

Net Cash - Operating Activities

 

Net cash used in operating activities was $2,882 for the quarter ended March 31, 2016 and $3,793 for the quarter ended March 31, 2015.

 

 10 

 

 

Net Cash - Financing Activities

 

Net cash flow provided by financing activities was $2,950 for the quarter ended March 31, 2016 and $3,792 for the quarter ended March 31, 2015. The cash provided by financing activities is primarily attributable to loans made to the Company by a shareholder of the Company.

 

Limited Operating History; Need for Additional Capital

 

After we acquire grocery stores, we intend to fund operations with revenue generated from operations. However, we have not yet commenced operations, and commencement of operations is subject to the availability of sufficient capital. Until we generate revenues, we expect to finance operating costs over the next twelve months with existing cash on hand, commercial financing, private loans and/or the proceeds from a public and/or private securities offering. The extent of our operations will be governed by the amount of capital we are able to raise.

 

Important Assumptions

 

Start-up companies involve a high degree of risk and many never commence operations or achieve their business plans. At this stage without having commenced operations, we are unable to determine whether we will be able to sufficiently convert our business plan into a successful business operation. The implementation of our business plan will be possible only upon obtaining sufficient funding.

 

Off-Balance Sheet Arrangements

 

We do not have any 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 is material to investors.

 

Changes In and Disagreements with Accountants

 

None.

 

Critical Accounting Policies

 

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In accordance with GAAP, we are required to make estimates and assumptions that affect the reported amounts included in our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. On an ongoing basis, management reviews and refines those estimates.

 

Judgments are based on information including, but not limited to, historical experience, industry trends, conventional practices, expert opinions, terms of existing agreements and information from outside sources. Judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from these estimates.

 

Item 3.QUANTITATIVE AND QUALITATIVE ANALYSIS ABOUT MARKET RISK

 

Not applicable.

 

Item 4.CONTROLS AND PROCEDURES

 

The Company's management, including the President and Chief Executive Officer ("CEO") and Chief Operating Officer (“COO”) conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures as of March 31, 2016. Based on that evaluation, the CEO and COO have concluded that the Company’s disclosure controls and procedures are not effective to provide reasonable assurance that: (i) information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company's management, including the CEO and COO as appropriate to allow timely decisions regarding required disclosure by the Company; or (ii) information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Further, management necessarily, due to the limited resources of the Company, has been required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

 11 

 

 

The Company and its advisors are in the process of reviewing and completing a formal Disclosure Controls and Procedures policy and expects to have such a policy in place by the end of the third quarter 2016 and to continue to take additional steps necessary to ensure all controls and procedures are in place for full compliance with a goal to have all of our remediation measures in place by the end of the fourth quarter 2016. Management is in the process of implementing a remediation plan of the above-mentioned weaknesses in our internal control over financial reporting which includes but is not limited to the following steps:

 

Establish and implement a detailed timeline for review and completion of financial reports to be included in our Forms 10-Q and 10-K;
Employ the use of appropriate SEC and U.S. GAAP checklists in connection with our closing process and the preparation of our Forms 10-Q and 10-K.

 

The implementation of these remediation plans has been initiated and will continue through the first half of fiscal 2016. The material weaknesses will not be considered remediated until the applicable remedial procedures are tested and management has concluded that the procedures are operating effectively. Management recognizes that use of our financial resources will be required not only for implementation of these measures but also for testing their effectiveness and may seek the assistance of an outside service provider to assist in this process.

 

If we are not able to implement controls to avoid the occurrence of material weaknesses in our internal control over financial reporting in the future, then we might report results that are not consistent with our actual results and we may need to restate results that will have been previously reported.

 

 12 

 

 

PART II – OTHER INFORMATION

 

Item 1.LEGAL PROCEEDINGS

None

 

Item 1A.RISK FACTORS

Not applicable

 

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

None.

 

Item 3.DEFAULTS UPON SENIOR SECURITIES

None.

 

Item 4.MINE SAFETY DISCLOSURES

Not Applicable.

 

Item 5.OTHER INFORMATION

 

On May 2, 2016, Foothills Petroleum, Inc., a Nevada corporation (“Foothills Exploration”), acquired in a private transaction 14,112, 250 shares of common stock of the Company from five shareholders, constituting approximately 96% of the outstanding capital stock of the Company from five shareholders (the “Acquisition Transaction”). Following the closing of the Acquisition Transaction, the Company appointed B.P. Allaire as a director and interim President and also appointed Alex Hemb and Christopher Jarvis as directors. Shawn Clark, sole director of the Company prior to the closing of the Acquisition Transaction, will remain a director of the Company. The Company disclosed the Acquisition Transaction in its Current Report on Form 8-K filed with the Commission on May 6 2016.

 

Item 6.EXHIBITS

 

Exhibits required by Item 601 of Regulation S-K:

 

            Incorporated by Reference Herein

Exhibit

No.

  Exhibit Description  

Filed

Here-

with

 

Exhibit

No.

  Form/File No.   Filing Date
 3.1   Certificate of Incorporation        3.1  

Form S-1

File No. 333-190836

  August 27, 2013
                     
3.2   By-Laws       3.2  

Form S-1

File No. 333-190836

  August 27, 2013
                     
4.1   Specimen common stock certificate       4.1  

Form S-1

File No. 333-190836

  August 27, 2013
                     
10.1   Key Link Asset Corp. 2010 Incentive Compensation Plan       10.1  

Form S-1/A

File No. 333-190836

  December 16, 2013
                     
10.2   Form of Option Agreement under 2010 Incentive Compensation Plan       10.2  

Form 10-K/A

File No. 333-190836

  April 16, 2014
                     
10.3   Note Payable dated March 31, 2016 by the Company to Shawn Clark   X            
                     
31   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   X            
                     

 

 13 

 

 

32   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   X            
                     
101.INS   XBRL Instance Document*   X            
                     
101.SCH   XBRL Taxonomy Extension Schema Document*   X            
                     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document*   X            
                     
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document*   X            
                     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document*   X            
                     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document*   X            

 

* Pursuant to Rule 406T of Regulation S-T, the interactive files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 14 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date:  May 11, 2016 KEY LINK ASSETS CORP.
   
  By: /s/ Shawn P. Clark
  Shawn P. Clark
  Interim CFO
  (principal executive officer)
 

 

 15