NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL
STATEMENTS
October 31, 2019
The
accompanying unaudited condensed consolidated financial statements
of Treasure & Shipwreck Recovery, Inc., formerly Beliss Corp.
(“TSR”, “the Company”, “we”,
“us” or “our”) are unaudited, but in the
opinion of management, reflect all adjustments (consisting only of
normal recurring adjustments) necessary to fairly state the
Company’s financial position, results of operations, and cash
flows as of and for the dates and periods presented. The condensed
consolidated financial statements of the Company are prepared in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial
information.
These
unaudited condensed consolidated financial statements should be
read in conjunction with the Company’s audited financial
statements and footnotes included in the Company’s Report on
Form 10-K for the year ended April 30, 2019, filed with the
Securities and Exchange Commission (the “Commission”)
on August 16, 2019. The results of operations for the three and six
month periods ended October 31, 2019 are not necessarily indicative
of the results that may be expected for the entire year ending
April 30, 2020 or for any future period.
NOTE 1 – ORGANIZATION AND
NATURE OF BUSINESS
Treasure
& Shipwreck Recovery, Inc. was incorporated in the State of
Nevada on October 24, 2016 as Beliss Corp. The Company changed its
name to Treasure & Shipwreck Recovery Corp. on June 26, 2019.
The Company’s primary business strategy is to focus on
opportunities in the sunken treasure industry. The Company was
originally focused on the development of high impact internet
marketing, search engine optimization (“SEO”) software
and techniques, and the development of digital properties
(collectively “Internet Marketing”).
The
Company has shifted its focus to the sunken treasure industry,
however it is maintaining its Internet Marketing business in order
to fulfill any obligations to previous customers who made deposits
or in the event that any substantial new opportunities should
arise, which Management views as unlikely. Moreover, the Company
does not anticipate generating any significant revenues from the
Internet Marketing business for the foreseeable future. All of
these movements were made with explicit authorities for change in
the business plan with all involved as consultants and former
officers and directors.
Our
general business strategy is to be actively engaged in the sunken
treasure industry, researching, surveying, finding and recovering
artifacts, treasure or other items of value from valuable
historical shipwrecks from the 15th century to the present day. We
have taken on certain persons, in particular Dr. E. Lee Spence, who
are experts in the necessary fields of treasure finds. We also
intend to secure the rights for treasure salvage through courts and
other means. Furthermore, we will contract with outside service
providers to conduct salvage operations. Any recovered finds by the
Company are going to be split with Dr. E. Lee Spence who is a
foremost treasure expert and has taken on the role of Chief
Operating Officer as well as Chairman of the
Board.
NOTE 2 – GOING
CONCERN
These
condensed consolidated financial statements have been prepared on a
going concern basis, which assumes the Company will be able to
realize its assets and discharge its liabilities in the normal
course of business for the foreseeable future. The Company has
incurred net losses since inception, which raises substantial doubt
about the Company’s ability to continue as a going concern.
Based on its historical rate of expenditures, the Company expects
to expend its available cash in less than one month from December
19, 2019. Management’s plans include raising capital through
the equity markets to fund operations and, eventually, the
generation of revenue through its business. The Company does not
expect to generate any significant revenues for the foreseeable
future. At October 31, 2019, the Company had a working capital
deficit of $76,908. The Company is in immediate need of further
working capital and is seeking options, with respect to financing,
in the form of debt, equity or a combination thereof.
Failure
to raise adequate capital and generate adequate revenues could
result in the Company having to curtail or cease operations. The
Company’s ability to raise additional capital through the
future issuances of the common stock is unknown. Additionally, even
if the Company does raise sufficient capital to support its
operating expenses and generate adequate revenues, there can be no
assurances that the revenue will be sufficient to enable it to
develop to a level where it will generate profits and cash flows
from operations. These matters raise substantial doubt about the
Company’s ability to continue as a going concern; however,
the accompanying condensed consolidated financial statements have
been prepared on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal
course of business. These condensed consolidated financial
statements do not include any adjustments relating to the recovery
of the recorded assets or the classifications of the liabilities
that might be necessary should the Company be unable to continue as
a going concern.
NOTE 3 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Management
acknowledges its responsibility for the preparation of the
accompanying interim financial statements which reflect all
adjustments, consisting of normal recurring adjustments, considered
necessary in its opinion for a fair statement of its financial
position and the results of its operations for the interim period
presented. These financial statements should be read in conjunction
with the summary of significant accounting policies and notes to
financial statements included in the Company’s Form 10-K
annual report for the year ended April 30, 2019. The balance sheet
as of October 31, 2019 has been derived from the audited financial
statements. The results of the three and six months ended October
31, 2019 are not necessarily indicative of the results to be
expected for the full fiscal year ending April 30,
2020.
Principles of Consolidation
The
consolidated financial statements of the Company include the
accounts of the TSR Holdings, Inc. which is a wholly owned
subsidiary. Intercompany accounts and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with the original
maturities of three months or less to be cash equivalents. The
Company had $4,945 of cash as of October 31, 2019 and $0 as of
April 30, 2019.
Customer Deposits
Customer
Deposits discloses an amount paid by a customer prior to the
company providing it with goods or services. The company has an
obligation to provide the goods or services to the customer or to
return the money. The Company had $8,700 in customer deposits as of
October 31, 2019 and April 30, 2019.
Property and Equipment
Property
and equipment are recorded at cost. Fixed assets are recorded at historical cost.
Depreciation is computed on the straight-line method over the
estimated useful lives of the respective assets. Gains and
losses upon disposition are reflected in the Statements of
Operations in the period of disposition. Maintenance and repair
expenditures are charged to expense as incurred. Currently the Company’s only assets are a
diving vessel and a magnetometer which were both purchased in 2019
and are being depreciated over a ten and three year useful lives,
respectively.
Fair Value of Financial Instruments
As
topic 820 "Fair Value Measurements and Disclosures" establishes a
three-tier fair value hierarchy, which prioritizes the inputs in
measuring fair value. The hierarchy prioritizes the inputs into
three levels based on the extent to which inputs used in measuring
fair value are observable in the market.
These
tiers include:
|
Level
1:
|
defined
as observable inputs such as quoted prices in active
markets;
|
|
Level
2:
|
defined
as inputs other than quoted prices in active markets that are
either directly or indirectly observable;
|
|
Level
3:
|
defined
as unobservable inputs in which little or no market data exists,
therefore requiring an entity to develop its own
assumptions.
|
The
carrying value of cash and the Company’s loan from
shareholder approximates its fair value due to their short-term
maturity.
Income Taxes
Income
taxes are computed using the asset and liability method. Under the
asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are
measured using the currently enacted tax rates and laws. A
valuation allowance is provided for the amount of deferred tax
assets that, based on available evidence, are not expected to be
realized.
Revenue Recognition
Effective
May 1, 2018, the Company adopted the guidance of Accounting
Standards Codification (ASC) 606, Revenue from Contracts. The
implementation of ASC 606 did not have a material impact on the
Company’s financial statements as the Company, previously
recognized revenue when the performance obligation for customers
had been satisfied. The core principle of ASC 606 is that an entity
recognizes revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. An entity recognizes revenue in accordance with
that core principle by applying the following steps: Step 1:
Identify the contract(s) with a customer Step 2: Identify the
performance obligations in the contract Step 3: Determine the
transaction price Step 4: Allocate the transaction price to the
performance obligations in the contract Step 5: Recognize revenue
when (or as) the entity satisfies a performance obligation.
Specifically, Section 606-10-50 requires an entity to provide
information about: a. Revenue recognized from contracts with
customers, including the disaggregation of revenue into appropriate
categories; b. Contract balances, including the opening and closing
balances of receivables, contract assets, and contract liabilities;
c. Performance obligations, including when the entity typically
satisfies its performance obligations and the transaction price
that is allocated to the remaining performance obligations in a
contract; d. Significant judgments, and changes in judgments, made
in applying the requirements to those contracts. The
Company’s previous revenue was derived from providing high
impact internet marketing to Internet based businesses and small
businesses seeking to create websites and provide better search
engine optimization (“SEO”) software and techniques to
small Internet based businesses and people seeking to create
websites.
The new
revenue recognition standard won’t have impact on the company
since the company has not generated any revenues during the three
month period October 31, 2019.
For our
service contracts, our services provided are considered to be one
single performance obligation. Revenue and expenses are recognized
as services are rendered. The average period for satisfying the
performance obligation is three months. We have analyzed all of our
contracts and can confirm that all the requirements are considered
in these contracts:
1) The
contracts with customers were identified;
2) The
performance obligation was the creation of a website and the
provision of SEO-optimization and other services for this
site;
3) The
transaction price was determined in paragraph 1.3;
4) The
Company has only one performance obligation, so the whole
transaction price is related to this performance
obligation;
5) The
revenue was recognized when the performance obligation had been
satisfied.
The
Company offers no discounts, rebates, rights of return, or other
allowances to clients which would result in the establishment of
reserves against service revenue. Additionally, to date, the
Company has not incurred incremental costs in obtaining a client
contract.
Basic Loss per Share
The
Company computes loss per share in accordance with FASB ASC 260
“Earnings per Share”. Basic loss per share is computed
by dividing net loss available to common shareholders by the
weighted average number of outstanding common shares during the
period. Diluted loss per share gives effect to all dilutive
potential common shares outstanding during the period. Dilutive
loss per share excludes all potential common shares if their effect
is anti-dilutive. As of October 31, 2019 and 2018 there were no
potentially dilutive debt or equity instruments issued or
outstanding.
Recent Accounting Pronouncements
We have reviewed the recently issued, but not yet effective,
accounting pronouncements and we do not believe any of these
pronouncements will have a material impact on the
Company.
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which issued new
guidance related to leases that outlines a comprehensive lease
accounting model and supersedes the current lease guidance. The new
guidance requires lessees to recognize lease liabilities and
corresponding right-of-use assets for all leases with lease terms
of greater than 12 months. It also changes the definition of a
lease and expands the disclosure requirements of lease
arrangements. The new guidance must be adopted using the modified
retrospective approach and will be effective for the Company in the
fiscal year beginning May 1, 2020. Early adoption is permitted. The
Company has reviewed this guidance and believes it has no impact on
its financial statements and related disclosures.
NOTE 4 – FIXED
ASSETS
Fixed
assets at October 31, 2019 and April 30, 2019 are summarized
below:
|
|
October 31, 2019
(Unaudited)
|
|
|
Fixed
Assets
|
$60,390
|
$17,720
|
|
Accumulated
Depreciation
|
(2,422)
|
(17,720)
|
|
Fixed Assets,
Net
|
$57,968
|
$-
|
Depreciation
expense was $2,422 and $1,189 for the three months ended October
31, 2019 and 2018, respectively, and $2,422 and $2,377 for the six
months ended October 31, 2019 and 2018, respectively. Depreciation
expense for the periods ended in 2019 are related to the diving
vessel and the magnetometer. Depreciation expense for the periods
ended in 2018 was for furniture and office equipment that the
Company wrote down to a balance of $0 at April 30,
2019.
NOTE 5 – LOANS
Loan from Officer
As of
October 31, 2019 Craig Huffman, an officer and director, provided
loans to the Company of $56,390 under a convertible promissory
note. This convertible promissory note is unsecured, non-interest
bearing, and is convertible into common shares of the Company stock
at $2.75 per share and due on demand. The balance due to Mr.
Huffman was $56,390 as of October 31, 2019, and $17,790 as of April
30, 2019.
Short Term Loans
As of
October 31, 2019, the Company had loans totaling $16,763 with two
non-related parties, a loan in the amount of $14,063 and a loan in
the amount of $2,700. These loans are unsecured, non-interest
bearing and due on demand.
NOTE 6 – COMMITMENTS AND
CONTINGENCIES
Material Agreement
On June
22, 2019 the Company entered into a consulting agreement with Dr.
E. Lee Spence to provide supervisory services as the
Company’s Chief Operation Officer (“COO”). As COO
Dr. Spence agreed to perform duties and responsibilities on a part
time basis related to overseeing the operations of the Company
including selection and supervision of archaeologists, selection
and supervision of personnel and experts to oversee the
conservation of any recovered objects, assistance with selection of
personnel for the scanning and search and recovery operations
including boat captains and crew, analysis and review of potential
shipwreck sites, other supervisory and advisory services over the
operations, interaction with state and governmental authorities as
necessary for site approval and permitting, budgeting and
purchasing of equipment, vessels, crew, etc. Per the agreement the
Company intended for Dr. Spence to be the lead expert of all of its
projects. Dr. Spence is to provide the services at his discretion
on a part time basis. The Agreement further stipulates that Dr.
Spence will commit research, recovery and other operations for an
admiralty claim under his control which exists off the coast of
South Carolina. Dr. Spence my also provide the Company with
information pertaining to other shipwreck sites under certain
conditions.
The
term of the Agreement is for five years after which it may continue
on an at will basis in perpetuity. The Agreement is not exclusive
for either party. The Company agreed to provide Dr. Spence with
information including funding, timelines, etc. regarding its
potential shipwreck sites and operations. The Company agreed to pay
Dr. Spence an annual salary of $125,000 annualized for the first
six months of the agreement and then a salary of $250,000
annualized thereafter. If the Company is not able to pay the salary
then it will be accrued and paid on a first due basis of accounting
and shall accrue interest at eighteen percent per annum. The
compensation may be converted into shares of the Company common
stock at a fifty percent discount to the then existing market
price. The Board of Directors may award additional bonuses to Dr.
Spence at its discretion based on the success of any research,
location and/or recovery of artifacts or wrecks. The Company also
agrees to pay all necessary expenses for travel, lodging , meals
and other necessary costs.
Legal Proceedings
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies. The Company evaluates its exposure to the
matter, possible legal or settlement strategies and the likelihood
of an unfavorable outcome. If the Company determines that an
unfavorable outcome is probable and can be reasonably estimated, it
establishes the necessary accruals. As of October 31, 2019, the
Company is not aware of any contingent liabilities that should be
reflected in the consolidated financial statements.
NOTE 7 – SUBSEQUENT
EVENTS
Subsequent
to October 31, 2019 the Company sold 68,334 shares of restricted
common stock under subscription agreements for approximately
$62,500 in proceeds, used for general corporate purposes, working
capital and repayment of debt.
In
November 2019, TSR and Dr. Spence agreed that his services as Chief
Operating Officer and as Chairman would be concluded and his
resignation from such positions was accepted as of the date of the
filing of this Form 10-Q. TSR and Dr. Spence are in discussions
regarding several issue including whether or not he will continue
to provide consulting services to the Company and the terms and
conditions of any such future services. TSR determined that it
needed a more aggressive business plan for operations which could
be concluded through numerous other potential short term and long
term partners.
