NOTES TO FINANCIAL STATEMENTS
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NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Nature of Business
- Interdyne Company (the "Company") was incorporated in October 1946 in the state of California. The Company is a dormant shell currently seeking new opportunities. On November 22, 1988, the Company filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Central District of California. On May 17, 1990, the Company’s Amended Plan of Reorganization (the “Plan”) was confirmed by Bankruptcy Court, and the Plan became effective May 29, 1990. On July 20, 1990, the Bankruptcy Court approved a stipulation for nonmaterial modifications to the Plan. All claims and interest have been settled in accordance with the terms of the Plan. On August 22, 1990, the Board of Directors approved a change in the Company’s year-end to June 30, pursuant to the Plan.
Cash and Cash Equivalents
– For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Related party –
The Company follows ASC 850, “Related Party Disclosure”, for the identification of related parties and disclosure of related party transactions.
Concentrations of Credit Risk
– The Company does not have any asset that exposes it to credit risk. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of a receivable due from an affiliate. Due to a guarantee of the amount by a different credit-worthy affiliate, an allowance for possible losses has not been made.
Income Taxes
– The Company accounts for income taxes in accordance with the provisions of the
Financial Accounting Standards Board (“FASB”) codified within Accounting Standards Codification (“ASC”) Topic No. 740-10, Income Taxes
. Deferred income taxes are recognized for the temporary differences between the tax basis of assets and liabilities and their financial reporting amounts. The Company assesses, on an annual basis, the realizability of its deferred tax assets. A valuation allowance for deferred tax assets is established if, based upon available evidence, it is more likely than not that all or a portion of the deferred tax assets will not be realized.
Use of Estimates
– The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are based on the Company’s historical results as well as management’s future expectations. The Company’s actual results may vary from those estimates and assumptions.
Reclassifications –
Certain prior year amounts have been reclassified to conform with the current year presentation. These reclassifications had no impact on net earnings and financial position.
Net Loss per Share
– The Company adopted ASC No. 260, “
Earnings Per Share
”, that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with ASC No. 260, “
Earnings Per Share
”, any anti-dilutive effects on net income (loss) per share are excluded. The Company has no potentially dilutive securities outstanding for any years presented. Weighted average shares for computing net loss per share were 39,999,942 for each of the years presented.
Fair value of Financial Instruments-
The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.
Fair value Measurement-
Our financial instruments consist principally of cash, due from affiliate, accrued expenses, and due to related party. ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments establish a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.
Fair Value Hierarchy
The Company has categorized its financial instruments, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
Financial assets and liabilities recorded on the balance sheet are categorized based on the inputs to the valuation techniques as follows:
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Level 1
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Financial assets and liabilities for which values are based on unadjusted quoted prices for identical assets or liabilities in an active market that management has the ability to access.
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Level 2
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Financial assets and liabilities for which values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (commodity derivatives and interest rate swaps).
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Level 3
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Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
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When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. The carrying amounts of cash, accrued expenses, and due to related party approximate fair value because of the short-term nature of these items. Per ASC Topic 820 framework these are considered Level 3 inputs where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions developed by the Company.
Recent Accounting Pronouncements
–Management has reviewed all recent accounting pronouncements and determined that none will have a material impact on the Company’s present or future financial statements.
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RELATED PARTY TRANSACTIONS
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In prior years, the Company made advances to Acculogic, Inc., an affiliated company through common ownership and management. The advances bear interest at a rate of 8.5% per annum and are payable on demand. Interest recorded from the affiliate totaled $16,180 and $16,997, respectively, for the years ended June 30, 2016 and 2015. The Company recorded payments of $18,975 and $27,000 from the affiliate, respectively, for the years ended June 30, 2016 and 2015.The outstanding balance, including interest, was $194,104 as of June 30, 2016 and $196,899 as of June 30, 2015. The notes receivable is guaranteed by AMT Datasouth Corp., another affiliated company controlled by the Company’s Chief Executive Officer, until it has been satisfied or discharged. On July 25, 2016, the total amount due from Acculogic, Inc. has been repaid in full and consequently the guarantee ceased to be valid.
An officer of the Company charged a management fee totaling $6,000 for each of the years ended June 30, 2016 and 2015 for the use of a home office, accounting and other services. The amount payable was $21,500 and $15,500 as of June 30, 2016 and June 30, 2015, respectively.
Income taxes for the years ended June 30, 2016 and 2015 represent state minimum franchise tax of $800. The Company had net operating loss carryovers for federal income tax purposes totaling approximately $70,480 and $59,728, as of the years ended June 30, 2016 and 2015, respectively. The ultimate realization of such loss carryovers will be dependent on the Company attaining future taxable earnings. Based on the level of historical operating results and projections of future taxable earnings, management believes that it is more likely than not that the Company will not be able to utilize the benefits of these carryovers. Therefore, a full valuation allowance has been recorded against the gross deferred tax assets arising from the June 30, 2016 and 2015 loss carryovers which based on using 34% enacted federal tax rate is $23,964 and $20,308, respectively. If not utilized, the carryovers expire beginning in fiscal 2026.
The Company files income tax returns in the U.S. federal jurisdiction and in the state of California. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations by tax authorities for the years ending June 30, 2011 and earlier. According to Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), ownership changes may limit the amount of the NOL carry forwards that can be utilized annually to offset future taxable income and tax, respectively.
On July 25, 2016, the Company received the full payment of the amount due from Acculogic, Inc., a related party, in the amount of $195,204.