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General | People (10) | Filings (92) | Investment rounds (1) | Annual reports (5) | Stock | News

CLOUD SECURITY CORP. SEC Filing Form 10-K Annual report 2/2017, submited: 2017-06-14

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Form 10-K

A 10-K is a comprehensive summary report of a company's performance that must be submitted annually to the Securities and Exchange Commission. Typically, the 10-K contains much more detail than the annual report. It includes information such as company history, organizational structure, equity, holdings, earnings per share, subsidiaries, etc.

The 10-K must be filed within 60 days (it used to be 90 days) after the end of the fiscal year.

10-K 1 cloud_10k-022817.htm FORM 10-K

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-K

 

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

 

For the fiscal year ended February 28, 2017

 

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 000-54440

 

CLOUD SECURITY CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada   27-4479356

State or other jurisdiction of

incorporation or organization

 

(I.R.S. Employer

Identification No.)

 

927 Canada Ct.

City of Industry, CA 91748

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (626) 839-9998

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes     x No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act: o Yes     x No

 

Indicate by check mark whether the registrant(1) has filed all reports required 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 day. x Yes     o 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). x Yes     o No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

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

Large accelerated filter o   Accelerated filter o
         
Non-accelerated filter o (Do not check if a smaller reporting company) Smaller reporting company x

Emerging growth company

o

     

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

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

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $2,503,752, based upon the price ($2.40) at which the common stock was last sold as of August 31, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, multiplied by the approximate number of shares of common stock held by persons other than executive officers, directors and five percent stockholders of the registrant without conceding that any such person is an “affiliate” of the registrant for purposes of the federal securities laws.  

 

As of June 13, 2017, 13,043,230 shares of our common stock were issued and outstanding.

 

Documents Incorporated by Reference: None

 

 

 

   
 

 

TABLE OF CONTENTS

 

    Page
PART I    
     
ITEM 1. Business 1
ITEM 1A. Risk Factors 5
ITEM 1B. Unresolved Staff Comments 5
ITEM 2. Properties 5
ITEM 3. Legal Proceedings 5
ITEM 4. Mine Safety Disclosures 5
     
PART II    
     
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matter and Issuers Purchase of Equity Securities 6
ITEM 6. Selected Financial Data 7
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 7
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 9
ITEM 8. Financial Statements and Supplementary Data 10
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11
ITEM 9A. Controls and Procedures 11
ITEM 9B. Other Information 12
     
PART III    
     
ITEM 10. Directors, Executive Officers and Corporate Governance 13
ITEM 11. Executive Compensation 16
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 17
ITEM 13. Certain Relationships And Related Transactions, and Director Independence 18
ITEM 14. Principal Accounting Fees And Services 19
     
PART IV    
     
ITEM 15. Exhibits and Financial Statements Schedules 21
     
SIGNATURES 22

 

 

 

 

 

 

 

 

 

   
 

 

PART I

 

Special Note Regarding Forward-Looking Statements

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:

 

  · The availability and adequacy of our cash flow to meet our requirements;
  · Economic, competitive, demographic, business and other conditions in our local and regional markets;
  · Changes or developments in laws, regulations or taxes in our industry;
  · Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities;
  · Competition in our industry;
  · The loss of or failure to obtain any license or permit necessary or desirable in the operation of our business;
  · Changes in our business strategy, capital improvements or development plans;
  · The availability of additional capital to support capital improvements and development; and
  · Other risks identified in this report and in our other filings with the Securities and Exchange Commission or the SEC.

 

This report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Use of Term

 

Except as otherwise indicated by the context, references in this Annual Report to the words "we," "our," "us," the "Company," "CLDS," or “Cloud Security” refers to Cloud Security Corporation. All references to “USD” or United States Dollars refer to the legal currency of the United States of America.

 

ITEM 1. DESCRIPTION OF BUSINESS

 

History and Organization

 

We were formed by the filing of Articles of Incorporation with the Secretary of State of the State of Nevada on December 20, 2010, originally as Accend Media. On or about May 22, 2012, Accend Media, and Cloud Star Corporation (“Cloud Star”), a privately-held Nevada corporation headquartered in California, entered into an Acquisition Agreement and Plan of Merger (“Merger”). Prior to the Merger, Accend Media effectuated a five-for-one forward stock split on May 7, 2012. We changed our corporate name to Cloud Star Corporation upon consummation of the Merger on May 23, 2012. On May 28, 2013, we changed our corporate name to Cloud Security Corporation (“Cloud Security” or “Company”). The Merger was accounted for as a reverse acquisition with Cloud Star being treated as the acquirer for accounting purposes. Accordingly, for all periods presented in this Annual Report on Form 10-K (“Form 10-K”), the financial statements of Cloud Star have been adopted as the historical financial statements of the Company known as a change in reporting entity. Accordingly, Cloud Star’s October 17, 2011 formation date is considered the date of “Inception” in the financial statements.

 

On December 8, 2014, we entered into a Stock Purchase Agreement (the “SPA”) with Goldenrise Development, Inc., a California corporation (“Goldenrise”). In connection with the SPA, we also agreed to effectuate a 1:100 reverse stock split of the Company’s issued and outstanding common stock (“Reverse Split”) which became effective on January 22, 2015. Under the SPA, we sold 12,000,000 shares of our common stock to Goldenrise for $180,000 which equated to approximately 92% of our outstanding shares. This transaction effectuated a change in control of the Company and the then officer and members of the board of directors resigned and were replaced by new management.

 

On March 31, 2017, Goldenrise entered into a Stock Purchase Agreement (the “Agreement”) with Zhi Lu Peng, an individual (the “Purchaser”). Pursuant to the Agreement, Goldenrise agreed to sell and Purchaser agreed to purchase 12,000,000 restricted common stock shares of the Company (the “Shares”), representing approximately 92.12% of the Company’s outstanding shares of common stock. In consideration for the Shares, Purchaser will pay to Goldenrise a total of $400,000 as follows: (i) $100,000 upon the execution of the Agreement, and (ii) $300,000 on or before June 15, 2017 (the “Closing”). The Agreement is subject to certain customary conditions to Closing.

  

The transaction contemplated by the Agreement would effectuate a change in control of the Company should it ultimately close. Purchaser would own approximately 92.12% of the Company's issued and outstanding common stock. There are no arrangements or understandings among members of both the former and new control groups and their associates with respect to election of officers or other matters. The foregoing description of the Agreement is not complete and is qualified in its entirety by reference to the full text thereof, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Commission on April 4, 2017.

 

 3 
 

 

Overview and Business of Issuer

 

We are an early stage security and information technology services and software company that delivers immediate, easy and secure access to computer desktops and other consumer electronic devices from remote locations.

 

Our principal business has been the software development of MyComputerKey™; however, due to cash flow constraints, we have been unable to proceed with the further development of our software. We are currently evaluating the software infrastructure and interface for MyComputerKey™, Phase 1 (version 3) of MyComputerKey™ and additional cloud computing security applications.

 

Due to enhanced competition in the software development market and advancements in technology made by our competitors, we have begun evaluating alternative business plans which we may elect to pursue in the future.

  

Intellectual Property

 

Our success depends in part on our ability to protect our intellectual property and proprietary technologies.  We plan to rely on a combination of trademark, copyright, trade secret and patent laws in the United States as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We plan also to rely on copyright laws to protect any future computer programs and our proprietary databases. We currently own all rights and patents associated with the Invention titled, “Apparatus Systems and Methods for Virtual Desktop Access and Management”, described under patent application (U.S. Serial Number 13/173220) for systems and methods for accessing and managing a computer desktop, and with the invention titled, “System and Methods for One-Time Password Generation on a Mobile Computing Device”, described under patent application (U.S. Serial Number 61/832534) for process and methods of for one-time password on mobile computing devices rel. We have recorded a formal notice of assignment related to inventions/patent applications with the United States Patent and Trademark Office previously held in the name of former executives of the Company.

 

The patented system described under Serial No. 61/173220 is comprised of a removable virtual desktop Key permitting remote access and management of various computing devices that are communicatively linked to the Company’s secured cloud network. The Key allows the user secured virtual access and management of their desktop interface through a secondary computer only through unique user identification validation and a series of encrypted security file authentications including a DRM signature, a number of login credentials, and a biometric data template so even if passwords are breached the Key remains uncompromised.

 

The Company must actively manage risks related to maintaining its technology and systems which may be obsolete without further development. It may be more costly to upgrade obsolete technology and it may be more cost effective to fund the development of a replacement system or new technology all together.

 

From time to time, we may encounter disputes over rights and obligations concerning intellectual property. Also, the efforts management has taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm the business, the brand and reputation, and the ability to compete. Also, protecting our intellectual property rights could be costly and time consuming.

 

Competition

 

Our potential competitors include large software development and internet-cloud technology based companies that are developing and/or offer products similar to ours. Many of our potential competitors have substantially greater financial, technical, and human resources than we do, as well as greater experience in the development of software products and the commercialization of those products. Our competitors’ products may be more effective, or more effectively marketed and sold, than any products we may commercialize and may render our products obsolete or non-competitive before we can recover the expenses of their development and commercialization. We anticipate that we will continue to face intense and increasing competition as new products enter the market and advanced technologies become available. However, we believe that if we are able to further develop our patented products, we may have key potential advantages over competitive products that could enable our products to capture meaningful market share from our competitors.

 

Industry Regulation

 

Our business is subject to a wide range of complex U.S. and foreign laws and regulations related to privacy, data protection, and intellectual property, among others. These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended, in a manner that could harm our business. Failure to comply with, or changes in, laws and regulations applicable to our businesses could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.

 

 

 

 4 
 

 

Marketing

 

Because we are currently in the development stage of our software products and processes we have not engaged in any marketing activities. Upon the successful completion of development we intend to implement a comprehensive integrated plan to achieve our business objectives. Our primary objectives include building brand awareness, developing lead generation programs that will drive sales and revenue, and developing an infrastructure that supports and measures our marketing activities. Our marketing activities will be driven by our website, organic and paid search optimization, direct marketing, events, social media, and eMarketing focused on small and medium sized businesses and individuals.

 

Employees

 

We currently have no active employees. We utilize independent contractors on a part-time/as needed basis to assist in our development activities, marketing, and financial and accounting support. We are also dependent upon our officers and directors for our future business development. As our operations expand, we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.

 

Where You Can Find More Information

 

We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). These filings are not deemed to be incorporated by reference into this Form 10-K. You may read and copy any documents filed by us at the Public Reference Room of the SEC, 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings with the SEC are also available to the public through the SEC’s website at http://www.sec.gov.

 

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 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. DESCRIPTION OF PROPERTY

 

Our corporate headquarters are located at: 927 Canada Ct., City of Industry, CA 91748.   We currently do not incur rent for this space. We believe that this space is adequate for our current and immediately foreseeable operating needs. We do not own any real property. The Company’s telephone number is (626) 839-9998.

 

ITEM 3. LEGAL PROCEEDINGS

 

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.

 

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable

 

 

 

 

 

 5 
 

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock is quoted on the Over-the-Counter Bulletin Board under the symbol “CLDS. We consider our stock to be “thinly traded” and any reported sale prices may not be a true market-based valuation of the stock.  Some of the bid quotations from the OTC Bulletin Board set forth below may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

    High Bid     Low Bid  
Year ended 2/29/2016                
3/1/2015-5/31/2015   $ 1.65     $ 0.71  
6/1/2015-8/31/2015     19.95       0.76  
9/1/2015-11/30/2015     6.01       2.10  
12/1/2015-2/29/2016     5.00       1.76  

Year ended 2/28/2017

3/1/2016-5/31/2016

  $ 5.50     $ 2.10  
6/1/2016-8/31/2016     4.00       2.40  
9/1/2016-11/30/2016     2.40       1.44  
12/1/2016-2/28/2017     1.65       0.89  

  

Shares eligible for future sale could depress the price of our common stock, thus lowering the value of a buyer’s investment. Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for shares of our common stock.

 

Our revenues and operating results may fluctuate significantly from quarter to quarter, which can lead to significant volatility in the price and volume of our stock. In addition, stock markets have experienced extreme price and volume volatility in recent years.  This volatility has had a substantial effect on the market prices of securities of many smaller public companies for reasons unrelated or disproportionate to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.

 

Record Holders

 

As of June 13, 2017, there were 15 registered holders of our common stock.

 

Dividends

 

We have never declared or paid any cash dividends on our common stock nor do we anticipate paying any in the foreseeable future. Furthermore, we expect to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

See “Securities Authorized for Issuance Under Equity Compensation Plans” included under Part II, Item 12 of this report, which is incorporated by reference into this Item 5.

 

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

Year Ended February 29, 2016

 

None

 

Year Ended February 28, 2017

 

None

 

 

 6 
 

 

Exemption From Registration. The shares of Common Stock referenced herein were issued in reliance upon one of the following exemptions:

 

(a) The shares of Common Stock referenced herein were issued in reliance upon the exemption from securities registration afforded by the provisions of Section 4(2) of the Securities Act of 1933, as amended, ("Securities Act"), based upon the following: (a) each of the persons to whom the shares of Common Stock were issued (each such person, an "Investor") confirmed to the Company that it or he is an "accredited investor," as defined in Rule 501 of Regulation D promulgated under the Securities Act and has such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities, (b) there was no public offering or general solicitation with respect to the offering of such shares, (c) each Investor was provided with certain disclosure materials and all other information requested with respect to the Company, (d) each Investor acknowledged that all securities being purchased were being purchased for investment intent and were "restricted securities" for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act and (e) a legend has been, or will be, placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

 

(b) The shares of common stock referenced herein were issued pursuant to and in accordance with Rule 506 of Regulation D and Section 4(2) of the Securities Act. We made this determination in part based on the representations of the Investor(s), which included, in pertinent part, that such Investor(s) was an “accredited investor” as defined in Rule 501(a) under the Securities Act, and upon such further representations from the Investor(s) that (a) the Investor is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (b) the Investor agrees not to sell or otherwise transfer the purchased securities unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such registration are available, (c) the Investor either alone or together with its representatives has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, and (d) the Investor has no need for the liquidity in its investment in us and could afford the complete loss of such investment.  Our determination is made based further upon our action of (a) making written disclosure to each Investor prior to the closing of sale that the securities have not been registered under the Securities Act and therefore cannot be resold unless they are registered or unless an exemption from registration is available, (b) making written descriptions of the securities being offered, the use of the proceeds from the offering and any material changes in the Company’s affairs that are not disclosed in the documents furnished, and (c) placement of a legend on the certificate that evidences the securities stating that the securities have not been registered under the Securities Act and setting forth the restrictions on transferability and sale of the securities, and upon such inaction of  the Company of any general solicitation or advertising for securities herein issued in reliance upon Rule 506 of Regulation D and Section 4(2) of the Securities Act.

 

Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA

 

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

 

CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K (THIS “FORM 10-K”), CONSTITUTE “FORWARD LOOKING STATEMENTS” WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE “REFORM ACT”). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS “BELIEVES”, “EXPECTS”, “MAY”, “SHOULD”, OR “ANTICIPATES”, OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF CLOUD SECURITY CORP. (“THE COMPANY”, “WE”, “US” OR “OUR”) TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-K, UNLESS ANOTHER DATE IS STATED, ARE TO FEBRUARY 28, 2017.

 

 

 

 7 
 

 

Overview of Current Operations

 

We are an early stage security and information access technology software company that delivers immediate information with ease and secure access to computer desktops and other consumer electronic devices from remote locations.

 

Our principal business has been the software development of MyComputerKey™; however, due to cash flow constraints, we have been unable to proceed with further development. We are currently evaluating the software infrastructure and interface for MyComputerKey™, Phase 1 (version 3) of MyComputerKey™ and additional cloud computing security applications. Additionally, we have begun evaluating additional business ventures.

 

On December 8, 2014, we entered into a stock purchase agreement (the “SPA”) with Goldenrise Development, Inc., a California corporation (“Goldenrise”) whereby we sold 12,000,000 shares of our common stock for $180,000 to Goldenrise representing approximately 92% of our outstanding shares. In connection with the SPA, we also agreed to effectuate a 1:100 reverse stock split of the Company’s issued and outstanding common stock (“Reverse Split”) which became effective on January 22, 2015. Our then directors and officers immediately preceding the close of this transaction resigned at closing. Goldenrise designated our current directors and officers. This transaction effectuated a change in control.

 

On March 31, 2017, Goldenrise entered into a Stock Purchase Agreement (the “Agreement”) with Zhi Lu Peng, an individual (the “Purchaser”). Pursuant to the Agreement, Goldenrise agreed to sell and Purchaser agreed to purchase 12,000,000 restricted common stock shares of the Company (the “Shares”), representing approximately 92.12% of the Company’s outstanding shares of common stock. In consideration for the Shares, Purchaser will pay to Goldenrise a total of $400,000 as follows: (i) $100,000 upon the execution of the Agreement, and (ii) $300,000 on or before June 15, 2017 (the “Closing”). The Agreement is subject to certain customary conditions to Closing. 

  

The transaction contemplated by the Agreement would effectuate a change in control of the Company should it ultimately close. Purchaser would own approximately 92.12% of the Company's issued and outstanding common stock. There are no arrangements or understandings among members of both the former and new control groups and their associates with respect to election of officers or other matters. The foregoing description of the Agreement is not complete and is qualified in its entirety by reference to the full text thereof, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Commission on April 4, 2017.

 

RESULTS OF OPERATIONS

 

We had no revenues in the years ending February 28, 2017 (“2017”) or February 29, 2016 (“2016”).

 

During the 2017 and 2016 periods, we incurred general and administrative expenses of $43,999 and $56,169, respectively. The primary reasons attributable for the decrease during the 2017 period from the 2016 period was we reduced our legal, stock transfer agent and related costs by $13,427, partially offset by $3,400 in higher accounting fees. During the 2017 period, we recorded a gain on the cancellation of accounts payable for invoices outstanding in the years 2012 through 2014. Management has not received communications from these vendors to collect on these amounts. Additionally, during the 2016 period, we recorded a reversal of estimates of previously accrued compensation and related taxes of $21,293.

 

Our net loss decreased to $44,799 for the 2017 period from $56,969 for the 2016 period. The decrease was attributable to lower and general and administration costs as described above. 

 

Summary of any product research and development that we will perform for the term of our plan of operation.

 

We may continue the development of multiple versions of our MyComputerKey™ product, including an APP version for mobile phones and tablets. During the 2017 and 2016 periods, we did not incur costs associated with research and development activities.

  

Expected purchase or sale of plant and significant equipment

 

We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.

 

Significant changes in the number of employees

 

As of February 28, 2017, we have no active employees. We utilize independent contractors on a part-time/as needed basis to assist in our development activities, marketing, and financial and accounting support. We are also dependent upon our officers and directors for our future business development. As our operations expand, we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.

  

 

 

 8 
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of February 28, 2017, we had cash and cash equivalents of $3,366 and a working capital deficit of $8,110 as compared to cash and cash equivalents of $2,680 and a working capital deficit of $27,811 as of February 29, 2016.

 

We had total liabilities of $14,151 as of February 28, 2017 consisting of accounts payable as compared to $30,666 as of February 29, 2016.

 

We had a total stockholders’ deficit of $8,110 and an accumulated deficit of $1,743,679 as of February 28, 2017.

 

During 2017, we used $63,814 of cash in operating activities which was attributable primarily to our net loss of $44,799 and a $16,515 reduction of accounts payable.

 

During 2016, we used $114,387 of cash in operating activities which was attributable primarily to our net loss of $56,969 and $57,418 in aggregate reductions of accounts payable and accrued payroll.

  

During 2017 and 2016, we received $64,500 and $60,008 respectively in capital contributions from Goldenrise including $57,037 received in 2016 from a 2015 stock sale.

    

Since inception, we have processed compensation to our former Chief Executive Officer as an independent contractor under Form 1099 instead of processing it as payroll under Form W-2. We do not expect that any fees or penalties incurred as a result will cause any meaningful or significant misreporting of our financial condition and results of operations for the years ended February 28, 2017, February 29, 2016, or going forward.

 

Additional capital is required in order to acquire the source code developed by the third party developers retained to complete the MyComputerKey™ project. Management has continued negotiations with these developers to resolve and restructure the original contract but has not been successful to date. Without further resolution, the Company has determined that it may be in its best interests to pursue alternative business ventures.

 

Since we have no liquidity and have suffered losses, we depend to a great degree on the ability to attract external financing in order to conduct our business activities and expand our operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. If we are unable to raise additional capital from conventional sources, including increases in related party and non-related party loans and/or additional sales of stock, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results, including our inability to acquire the source code for Phase 1 (Version 3) of our MyComputerKey™ product. We have no commitments to provide us with financing in the future, other than described above. Our independent registered public accounting firm included an explanatory paragraph raising substantial doubt about the Company’s ability to continue as a going concern.

 

Notwithstanding, we anticipate generating losses and therefore may be unable to continue operations in the future. We anticipate that we will require additional capital in order to grow our business by increasing headcount and our budget for fiscal year ending 2018. We may use a combination of equity and/or debt instruments to funds our growth strategy or enter into a strategic arrangement with a third party. 

 

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 or operations, liquidity, capital expenditures or capital resources that is material to investors.

  

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

None.

 

Recent Pronouncements

 

The Company's management has evaluated all the recently issued accounting pronouncements through the filing date of these financial statements and does not believe that any of these pronouncements will have a material impact on the Company's financial position and results of operations.

 

Off-Balance Sheet Arrangements

 

None.

 

ITEM 7A. 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.

  

 

 9 
 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Index to Financial Statements

 

Report of Independent Registered Public Accounting Firm F-1
Balance Sheets as of February 28, 2017 and February 29, 2016 F-2
Statements of Operations for the years ended February 28, 2017 and February 29, 2016 F-3
Statements of Stockholders’ Deficit for the years ended February 28, 2017 and February 29, 2016 F-4
Statements of Cash Flows for the years ended February 28, 2017 and February 29, 2016 F-5
Notes to Audited Financial Statements F-6

 

 

 

 

 

 

 

 

 

 

 

 10 
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Shareholders

Cloud Security Corporation

 

We have audited the accompanying balance sheets of Cloud Security Corporation (the “Company”) as of February 28, 2017 and February 29, 2016, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cloud Security Corporation as of February 28, 2017 and February 29, 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company requires working capital to continue to develop, operate and market its products. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ dbbmckennon

 

Newport Beach, California

June 14, 2017

 

 

 

 

 

 F-1 
 

 

PART I – FINANCIAL INFORMATION

CLOUD SECURITY CORPORATION

BALANCE SHEETS

 

   February 28, 2017   February 29, 2016 
ASSETS          
Current assets:          
Cash  $3,366   $2,680 
Prepaid expense   2,500     
Deposit   175    175 
TOTAL ASSETS  $6,041   $2,855 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities:          
Accounts payable  $14,151   $30,666 
Total liabilities   14,151    30,666 
           
Commitments and contingencies        
           
Stockholders' deficit:          
Common stock, $0.001 par value, 190,000,000 shares authorized; 13,026,980 shares issued and outstanding at February 28, 2017 and February 29, 2016.   13,027    13,027 
Additional paid-in capital   1,722,542    1,658,042 
Accumulated deficit   (1,743,679)   (1,698,880)
Total stockholders' deficit   (8,110)   (27,811)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $6,041   $2,855 

 

 

 

See accompanying notes to financial statements

 

 

 

 

 

 

 

 

 

 

 F-2 
 

 

CLOUD SECURITY CORPORATION

STATEMENTS OF OPERATIONS

 

   For the Year Ended
February 28, 2017
   For the Year Ended
February 29, 2016
 
Revenue  $   $ 
           
General and administrative expenses   43,999    56,169 
           
Loss before provision for income taxes   (43,999)   (56,169)
           
Provision for income taxes   800    800 
           
Net loss  $(44,799)  $(56,969)
           
Weighted average shares basic and diluted   13,026,980    13,026,980 
Weighted average basic and diluted loss per common share  $(0.01)  $(0.01)

 

 

See accompanying notes to financial statements

 

 

 

 

 F-3 
 

 

CLOUD SECURITY CORPORATION

STATEMENTS OF STOCKHOLDERS' DEFICIT

 

   Common Stock   Additional Paid-in   Accumulated   Total Stockholders’ 
   Shares   Amount   Capital   Deficit   Deficit 
Balance at February 28, 2015   13,026,980   $13,027   $1,598,034   $(1,641,911)  $(30,850)
Capital contributions from Goldenrise           60,008        60,008 
Net loss               (56,969)   (56,969)
Balance at February 29, 2016   13,026,980    13,027    1,658,042    (1,698,880)   (27,811)
Capital contributions from Goldenrise           64,500        64,500 
Net loss               (44,799)   (44,799)
Balance at February 28, 2017   13,026,980   $13,027   $1,722,542   $(1,743,679)  $(8,110)

 

 

 

See accompanying notes to financial statements

 

 

 

 

 

 

 

 

 

 

 

 F-4 
 

 

CLOUD SECURITY CORPORATION

STATEMENTS OF CASH FLOWS

 

   For the Year Ended   For the Year Ended 
   February 28, 2017   February 29, 2016 
Cash flows from operating activities:          
Net  $(44,799)  $(56,969)
Changes in operating assets and liabilities:          
Prepaid expense   (2,500)    
Accounts payable   (16,515)   1,232 
Accrued liabilities        (58,650)
Net cash used in operating activities   (63,814)   (114,387)
           
Cash flows from financing activities:          
Proceeds from sale of common stock from Goldenrise       57,037 
Capital contribution from Goldenrise   64,500    60,008 
Net cash provided by financing activities   64,500    117,045 
           
Net change in cash   686    2,658 
Cash, beginning of period   2,680    22 
Cash, end of period  $3,366   $2,680 
           
Supplemental disclosures of cash flow information          
Cash paid during the period for:          
Interest  $   $ 
Taxes  $   $800 
           

 

 

See accompanying notes to financial statements

 

 

 

 

 

 

 

 

 

 F-5 
 

 

CLOUD SECURITY CORPORATION

NOTES TO FINANCIAL STATEMENTS

 

  1. Organization and Business

 

Cloud Security Corporation, formerly Accend Media (the “Company”), was incorporated in the State of Nevada on December 20, 2010. On May 22, 2012, the Company merged with Cloud Star Corporation (“Cloud Star”), a privately held Nevada corporation incorporated on October 17, 2011 headquartered in California (the “Merger”). Cloud Star’s then Chief Executive Officer assigned his rights and interests in technology named “The VirtualKey Desktop Solution” (“MyComputerKey”) and additional cloud security technology products to the Company in connection with the Merger. Following the Merger, the Company conducted the business of Cloud Star and changed its name from “Accend Media” to “Cloud Star Corporation”. On May 28, 2013, the Company changed its corporate name to “Cloud Security Corporation”.

 

The Company’s principal business has been the software development of MyComputerKey; however, due to cash flow constraints, we have been unable to proceed with development of this software. The Company is currently evaluating the software infrastructure and interface for MyComputerKey, Phase 1 (version 3) of MyComputerKey and additional cloud computing security applications as well as alterntive business ventures. During 2016, the Company received a patent and is continuing to evaluate its intellectual property and business strategies including raising additional capital for further development of our product, MyComputerKey™, entering into third party development agreements for additional product enhancements, developing additional products, creating and implementing marketing strategies for the sale of our product and raise brand awareness, entering into partnership or distribution agreements, or even an outright sale of our intellectual property.

 

Stock Purchase Agreement

 

On December 8, 2014, the Company entered into a stock purchase agreement (the “SPA”) with Goldenrise Development, Inc., a California corporation (“Goldenrise”) whereby the Company sold 12,000,000 shares of its common stock for $180,000 to Goldenrise representing approximately 92% of our outstanding shares. In connection with the SPA, we also agreed to effectuate a 1:100 reverse stock split of the Company’s issued and outstanding common stock (“Reverse Split”) which became effective on January 22, 2015. The Company’s then directors and officers immediately preceding the close of this transaction resigned at closing. Goldenrise designated the current directors and officers of the Company. The transaction effectuated a change in control of the Company.

 

In connection with the SPA, the Company also entered into a Consulting Agreement with its then Chief Executive Officer, Safa Movassaghi, whereby, at closing of the SPA, Mr. Movassaghi remained with the Company as a consultant for a period of six (6) months to continue the development of the Company’s mobile software cloud security business. The Consulting Agreement with Mr. Movassaghi expired on June 8, 2015.

  

  2. Summary of Significant Accounting Policies

 

Basis of Presentation, Going Concern Considerations and Management’s Plans

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. The Company has no revenues, has incurred net losses and has an accumulated deficit of $1,743,679 as of February 28, 2017. The Company currently has limited liquidity and limited access to capital. These factors raise substantial doubt about our ability to continue as a going concern. If the Company is unable to obtain adequate capital, we could be forced to cease operations.

 

Management anticipates the Company will be dependent, for the foreseeable future, on additional capital to fund further development of our infrastructure and to fund operations until such time we have sufficient revenues to meet our cost structure. Additional capital is required in order to acquire source code developed by consultants retained to complete the project and to ultimately launch our anticipated products in the marketplace. In light of management’s efforts, there are no assurances that the Company will be successful in obtaining sufficient capital to continue as a going concern.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

  

 

 

 F-6 
 

 

Risks and Uncertainties

 

We have a limited operating history and have not commenced planned principal operations.

 

Our business and operations are sensitive to general business and economic conditions in the U.S. and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general condition of the U.S. and world economy. A host of factors beyond our control could cause fluctuations in these conditions, including the political environment and acts or threats of war or terrorism. Adverse developments in these general business and economic conditions, including through recession, downturn or otherwise, could have a material adverse effect on our financial condition and our results of operations.

 

We currently have no sales, marketing or distribution capabilities. Therefore, to commercialize our products, we expect to collaborate with third parties to perform these functions. We have no experience in developing, training or managing a sales force and will incur substantial additional expenses if we decide to market any of our future products directly. Developing a marketing and sales force is also time consuming and could delay launch of our future products. In addition, we will compete with many companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete successfully against these companies. While the product has been beta tested by three companies in the business-to-business market; the mass consumer market, including direct and indirect channels has not been tested.

 

While the Company holds patents for some of its technology, the Company must actively manage risks related to maintaining its technology and systems which may be obsolete without further development. It may be more costly to upgrade obsolete technology and it may be more cost effective to fund the development of a replacement system or new technology all together.

 

We do not own any manufacturing facilities and we intend to utilize contract manufacturers to meet manufacturing needs. Accordingly, if any of our proposed products become available for widespread sale, we may not be able to arrange for the manufacture of such product in sufficient quantities at an acceptable cost, or at all, which could materially adversely affect our future prospects.

 

Our industry is characterized by rapid changes in technology and customer demands. As a result, our products may quickly become obsolete and unmarketable. Our future success will depend on our ability to adapt to technological advances, anticipate customer demands, develop new products and enhance our current products on a timely and cost-effective basis. Further, our products must remain competitive with those of other companies with substantially greater resources. We may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products or enhanced versions of existing products. Also, we may not be able to adapt new or enhanced products to emerging industry standards, and our new products may not be favorably received.

  

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 estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimate is the determination of timing and the amount of costs to be capitalized for software development and any related impairment of such assets, estimates of fair value attributable to common stock, as well as the carrying value acquired technologies for which development has not been completed and tested.

 

Fair Value of Financial Instruments

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

 

  Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
  Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.
  Level 3 - Unobservable inputs which are supported by little or no market activity.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

  

 

 F-7 
 

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of February 28, 2017 and February 29, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivable deposits, accounts payable, accrued payroll and related costs, and related-party advances. Fair values for these items were assumed to approximate carrying values because of their short-term in nature or they are payable on demand. Cash of $3,366 and $2,680 represent the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at February 28, 2017 and February 29, 2016, respectively.

 

Basic Loss per Common Share

 

Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year.  The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.  As of February 28, 2017 and February 29, 2016, the Company had no shares of potentially dilutive shares that have been excluded from the diluted loss per share computations as they would be antidilutive for the periods presented.

 

Website and Software Costs

 

The Company’s accounting for software development costs complies with ASC 985-20, Costs of Software to be Sold, Leased or Marketed, whereby capitalization begins when the Company has a working prototype and has been tested, thereby achieving technological feasibility. This occurs very late in the development stage of the software product. The Company has determined the software costs do not fall under ASC 350-40, Internal-Use Software, based on the guidance in ASC 985-605-55-119 through 125 which covers guidance for hosting agreements. The Company’s believes its product will generally not be hosted and will reside on the technology platform available to the user.

 

As of February 28, 2017, the Company had no capitalized software costs. There were no development costs incurred during 2017 or 2016.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740 - Income Taxes, which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carry forwards. Tax law and rate changes are reflected in income in the period such changes are enacted. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. The Company includes interest and penalties related to income taxes, including unrecognized tax benefits, within the provision for income taxes.

 

The Company’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.

 

Stock-Based Compensation

 

ASC 718, Share-Based Payment requires that compensation cost related to share-based payment transactions for employees be recognized in the financial statements. Share-based payment transactions within the scope of ASC 718 include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans.

 

ASC 718 requires disclosure of the fair value and other characteristics of stock options and more prominent disclosure about the effects of an entity’s accounting policy decisions with respect to stock-based compensation on reported net loss. The Company has reflected the expense of such stock based compensation based on the fair value at the grant date for awards consistent with the provisions of ASC 718.

 

 

 

 F-8 
 

 

In connection with ASC 718, the fair value of our share-based compensation has been determined using the quoted market prices of the Company’s common stock. For stock options, we will be utilizing the Black-Scholes pricing model. The fair value of the shares and options granted are amortized as compensation expense on a straight line basis over the requisite service period of the award, which is generally the vesting period. The fair value calculations involve significant judgments, assumptions, estimates and complexities that impact the amount of compensation expense to be recorded in current and future periods. Upon option exercise, the Company issues new shares of stock.

  

The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of Emerging Issues Task Force (“EITF”) 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, codified into ASC 505 Equity. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement at various performance completion dates, and for unvested instruments, at each reporting date. Compensation expense, once recorded, may not be reversed.

 

New Accounting Pronouncements

 

The Company reviewed all recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC and they did not or are not believed by management to have a material impact on the Company's present or future financial statements.

 

  3. Commitments and Contingencies

  

Payroll

 

The Company has processed compensation to its former Chief Executive Officer as an independent contractor under Form 1099 instead of processing it as payroll under Form W-2. The Company intended to start processing its payroll under Form W-2 in the first or second fiscal quarter of 2013; however, such was not processed due to lack of liquidity considerations. The Company does not expect that any fees or penalties incurred as a result will cause significant misreporting of our financial condition and results of operations.

 

On December 8, 2014, in connection with that certain SPA, the Company settled all accrued payroll claims with its former Chief Executive Officer in connection with the execution of a consulting agreement with the Company. As a result, the Company recorded a reduction of $21,293 to general and administrative expenses in the accompanying statement of operations for the year ended February 29, 2016.

 

  4. Related Party Transactions

   

In the past, Goldenrise has funded certain Company costs, and may pay for certain costs on behalf of the Company in the future. No firm commitments have been made to fund such costs. See contributed capital below.

 

  5. Stockholders’ Deficit

 

Authorizations and Designations

 

The Company is authorized to issue 190,000,000 shares of its $0.001 par value common stock and 10,000,000 shares of its $0.001 par value preferred stock. As of February 28, 2017 and February 29, 2016, no preferred stock has been issued.

 

Common Stock Transactions

 

On March 29, 2013, the Company entered into an agreement with Wee Kai, the former Contract Chief Technical Advisor (“Contract CTA”). Among other terms, the Company agreed to issue 5,000 shares of common stock which have vested. The certificates for these shares have not actually been issued. However, the financial statements and notes for the year ended February 28, 2017 and February 29, 2016 have been prepared to reflect issuance of the 3,750 shares vested under this Agreement.

 

 

 F-9 
 

      

Contributed Capital

 

During the years ended February 28, 2017 and February 29, 2016, Goldenrise contributed $64,500 and $60,008 to fund business operations. 

 

2014 Stock Incentive Plan

 

On January 27, 2014, the Board of Directors adopted the 2014 Stock Incentive Plan (the “Plan”). The plan provides for the grant, at the discretion of the Compensation Committee of the Board of Directors, of stock awards, of common stock, restricted stock, awards of common stock, or stock options to purchase common stock of the Company, with a maximum of 150,000 shares. As of February 28, 2017, 131,875 shares are available for issuance under the Plan.

 

  6. Income Taxes

 

As of February 28, 2017, the Company had net operating loss carry forwards of approximately $806,000 that may be available to reduce future years' federal taxable income for 20 years through 2037. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these net operating loss carry forwards. Net operating losses will begin to expire in 2022.

 

The following table presents the current income tax provision for federal and state income taxes for the years ended February 28, 2017 and February 29, 2016:

 

   For the Year Ended February 28, 2017   For the Year Ended February 29, 2016 
Current tax provisions:          
Federal  $   $ 
State   800    800 
Total provision for income taxes  $800   $800 

 

Reconciliations of the U.S. federal statutory rate to the actual tax rate for the years ended February 28, 2017 and February 29, 2016:

 

   For the Year Ended February 28, 2017   For the Year Ended February 29, 2016 
US federal statutory income tax rate   -34%    -34% 
State tax - net of benefit   -6%    -6% 
Total provision for income taxes   0%    0% 
Non-deductible expenses, net of federal benefit   0%    0% 
Increase in valuation allowance   40%    40% 
Minimum state taxes   1%    1% 
Total provision for income taxes   1%    1% 

 

The Company's most significant non-deductible expenses relate to shares of stock issued for various agreements which aggregate approximately $673,000 since inception.

 

The components of the Company's deferred tax assets for federal and state income taxes as of February 28, 2017 and February 29, 2016 consisted of the following:

 

   February 28, 2017   February 29, 2016 
Non-current deferred tax assets          
Net operating loss carry forwards  $322,000   $305,000 
Less: valuation allowance   (322,000)   (305,000)
Net deferred tax assets  $   $ 

  

 

 

 

 F-10 
 

 

During the years ended February 28, 2017 and February 29, 2016, the valuation allowance increased approximately $17,000 and $28,000, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of February 29, 2016. Net operating losses may be limited as a result of the merger with Cloud Security and the sale of stock to Goldenrise.

 

The United States federal tax return years 2013 through 2016 are still subject to tax examination by the United States Internal Revenue Service, however, the Company does not have any ongoing tax examinations. The Company is subject to examination by the California Franchise Tax Board for the years 2013 to 2016 and currently does not have any ongoing tax examinations.

 

The United States federal and California state tax returns years 2015 have not been filed and the 2016 returns are on extension.

 

  7. Subsequent Events

 

As previously reported on Form 8-K, on March 31, 2017, Goldenrise Development, Inc., a California corporation (“Goldenrise”) and the Company entered into a Stock Purchase Agreement (the “Agreement”) with Zhi Lu Peng, an individual (the “Purchaser”). Pursuant to the Agreement, Goldenrise agreed to sell and Purchaser agreed to purchase 12,000,000 restricted common stock shares of the Company (the “Shares”), representing approximately 92.12% of the Company’s outstanding shares of common stock. In consideration for the Shares, Purchaser will pay to Goldenrise a total of $400,000 as follows: (i) $100,000 upon the execution of the Agreement, and (ii) $300,000 on or before June 15, 2017 (the “Closing”). The Agreement is subject to certain customary conditions to Closing. 

  

The transaction contemplated by the Agreement would effectuate a change in control of the Company should it ultimately close. Purchaser would own approximately 92.12% of the Company's issued and outstanding common stock. There are no arrangements or understandings among members of both the former and new control groups and their associates with respect to election of officers or other matters. The foregoing description of the Agreement is not complete and is qualified in its entirety by reference to the full text thereof, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Commission on April 4, 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 F-11 
 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-K. Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of February 28, 2017, our disclosure controls and procedures were effective.

 

Management's Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:

 

  · pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

  · provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and

 

  · provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

 

Our management assessed the effectiveness of our internal control over financial reporting as of February 28, 2017. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded its internal controls over financial reporting were effective as of February 28, 2017.

  

 

 

 

 11 
 

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

There was no change in our internal controls over financial reporting that occurred during the period covered by this Form 10-K, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Pursuant to Regulation S-K Item 308(b), this Form 10-K does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only the management's report in this Form 10-K.

  

ITEM 9B. OTHER INFORMATION

 

On April 5, 2016, the United States Patent and Trademark Office (the “USPTO”) issued the patent “Apparatus, Systems and Method For Virtual Desktop Access and Management” as U.S. Patent No. 9,306,954. The patent applicant was originally our former CEO and director, Safa Movassaghi, but the patent was assigned and recorded to the Company on February 23, 2016.

 

 

 

 

 

 

 

 

 

 12 
 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Identification of Directors and Executive Officers.

 

The following table sets forth the names, ages and positions of our executive officers and directors. All directors serve for a term set to expire at the next annual meeting of stockholders of the Company or until their successors are elected and qualified. All officers are appointed by our board of directors and their terms of officer are, except to the extent governed by an employment contract, at the discretion of our board of directors.

 

Name   Age   Position & Offices Held
         
Derek Yu   32   Chief Financial Officer and Director since February 11, 2015
Michael Dunn   65   Director since February 11, 2015
Jie Lai   25   Director since February 11, 2015

 

Biographies of Current Directors and Executive Officers

  

Derek Yu, Chief Financial Officer/Director. Mr. Yu obtained his Masters of Accounting degree from the School of Business and Management of National University in San Diego, California. Since August 2015, Mr. Yu has worked as a personal banker at Wells Fargo Bank. From 2010 to July 2015, Mr. Yu has been working as the Chief Financial Officer for AICEF in Los Angeles, California. Mr. Yu’s responsibilities as CFO include financial accounting, accounts receivable, accounts payable, project budgeting, payroll and cost management. Mr. Yu is fluent in Chinese and English.

 

Michael Dunn, Director. Mr. Dunn is an experienced business leader and executive with extensive experience managing and operating public companies. Mr. Dunn has served as Chief Executive Officer, Chief Financial Officer, and Chairman of the Board of Directors of Global Future City Holding Inc. (OTCQB: FTCY) (fka FITT Highway Products, Inc.) since May 28, 2008 until present . From December 1995 through 2010, Mr. Dunn was the Chief Executive Officer of Bankers Integration Group, Inc., an e-commerce company serving the automotive finance and insurance industry. In mid-1995 through 2006, Mr. Dunn started a company that generated a $60 million auto portfolio which later sold the paper to a subsidiary of General Motors. Mr. Dunn interfaced with the top CEOs of automotive companies, including Harold Poling, the former CEO and Chairman of Ford Motor Company, and Bob Eaton, the former Chairman and CEO of Daimler Chrysler. Mr. Dunn secured $22.2 million in equity financing for the Company, plus an additional $20.8 million and $1.9 million in debt and lease financing, respectively. Bankers Integration Group, Inc. filed for Chapter 11 bankruptcy protection in October of 2007, and Mr. Dunn acted as the Trustee and coordinated the sale of the assets. The case was closed on November 17, 2010. Mr. Dunn also served as Chairman and Chief Executive Officer of Mountaineer Gaming, a gaming and entertainment company, where he coordinated the design and implementation of a $10 million renovation of the racetrack, and put into service over 700 new video lottery machines. The park had over 450 employees while Mr. Dunn was Chairman and CEO of the public company. He was instrumental in raising investor capital of approximately $17 million, plus an additional $17 million in construction loan and equipment lease financing. Mr. Dunn has vast experience as being the owner, manager, and director of various businesses, both large and small. Mr. Dunn attended La Crosse State University, Wisconsin, in business and has extensive training in business management and leadership.

 

Jie Lai, Director. Ms. Lai, who is originally from China, received her Bachelor of Management degree from Dong Hua University and her Bachelor of Laws degree from East China University of Political Science and Law in Shanghai, China. Since relocating to the United States, Ms. Lai has obtained L.L.M Certificates in Business Law and Negotiation from University of Southern California, Gould School of Law and Harvard Law School, respectively. Ms. Lai has extensive business and legal experience in both China and the United States specializing in business negotiations, M&A, business valuation and financial modeling.

  

Significant Employees

 

None

 

Family Relationships

 

None.

 

 

 

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Involvement in Certain Legal Proceedings.

 

Our directors, executive officers and control persons have not been involved in any of the following events during the past ten years and which is material to an evaluation of the ability or the integrity of our directors or executive officers:

 

  1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

  2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
     
  3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

 

  4. being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

  5. any judicial or administrative proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business entity;

 

  6. Any judicial or administrative proceedings based on violations of federal or state securities, commodities, banking or insurance laws and regulations, or any settlement to such actions; and

 

  7. Any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that as of the date of Form 10-K, all current executive officers, directors and persons who beneficially own more than ten percent of our common stock are current in their Section 16(a) reporting.

  

Board of Directors

 

Our board of directors currently consists of four members. All directors serve for a term set to expire at the next annual meeting of stockholders of the Company or until their successors are elected and qualified.

 

Audit Committee

 

The Company does not presently have an Audit Committee. No qualified financial expert has been hired because the Company is too small to afford such expense.

 

Committees and Procedures

 

  1. The registrant has no standing audit, nominating and compensation committees of the Board of Directors, or committees performing similar functions. The Board acts itself in lieu of committees due to its small size.

 

  2. The view of the Board of Directors is that it is appropriate for the registrant not to have such a committee because its directors participate in the consideration of director nominees and the board and the company are so small.

  

  3. The members of the Board who acts as nominating committee are not independent, pursuant to the definition of independence of a national securities exchange registered pursuant to section 6(a) of the Act (15 U.S.C. 78f(a).

 

 

 

 

 14 
 

 

  4. The nominating committee has no policy with regard to the consideration of any director candidates recommended by security holders, but the committee will consider director candidates recommended by security holders.

 

  5. The basis for the view of the Board of Directors that it is appropriate for the registrant not to have such a policy is that there is no need to adopt a policy for a small company.

 

  6. The nominating committee will consider candidates recommended by security holders, and by security holders in submitting such recommendations.

 

  7. There are no specific, minimum qualifications that the nominating committee believes must be met by a nominee recommended by security holders except to find anyone willing to serve with a clean background.
     
  8. The nominating committee's process for identifying and evaluation of nominees for director, including nominees recommended by security holders, is to find qualified persons willing to serve with a clean backgrounds. There are no differences in the manner in which the nominating committee evaluates nominees for director based on whether the nominee is recommended by a security holder, or found by the board.

 

Code of Ethics

 

The officers, directors and employees of the Company are held to the highest standards of honest and ethical conduct when conducting the affairs of the Company. All such individuals must act ethically at all times in connection with services provided to the Company. We have not, however, adopted a formal, written corporate code of ethics that applies to our officers, directors and employees.

 

Limitation of Liability of Directors

 

Pursuant to the Nevada Revised Statute, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director's liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.

 

Nevada Anti-Takeover Law and Charter and By-law Provisions

 

The anti-takeover provisions of Sections 78.411 through 78.444 of the Nevada Revised Statute apply to us. Section 78.438 of the Nevada law prohibits the Company from merging with or selling more than 5% of our assets or stock to any shareholder who owns or owned more than 10% of any stock or any entity related to a 10% shareholder for two years after the date on which the shareholder acquired our shares, unless the transaction is approved by our Board of Directors. The provisions also prohibit the Company from completing any of the transactions described in the preceding sentence with a 10% shareholder who has held the shares more than two years and its related entities unless the transaction is approved by our Board of Directors or a majority of our shares, other than shares owned by that 10% shareholder or any related entity. These provisions could delay, defer or prevent a change in control.

  

Director Independence

 

Our board of directors has determined that currently Michael Dunn and Jie Lai qualify as “independent” as the term is used in Item 407 of Regulation S-K as promulgated by the SEC and in the listing standards of The Nasdaq Stock Market, Inc. - Marketplace Rule 4200.

 

 

 

 

 

 15 
 

  

ITEM 11. EXECUTIVE COMPENSATION

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer during the years ended February 28, 2017 and February 29, 2016 in all capacities for the accounts of our named executive officers:

 

Summary Compensation Table  
                    Stock     Option     All Other        
Name and Position   Year   Salary     Bonus     Awards ($)     Awards ($)     Compensation     Total ($)  
                                                     
Sam (Ning) Liu   2017   $                 $           $  
Former President and Chief Executive Officer(1)   2016   $                 $           $  
                                                     
Derek Yu   2017   $                 $           $  
President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Chairman of the Board   2016   $                 $           $  

_______________

 (1)  On January 13, 2017, Mr. Ning (Sam) Liu resigned as Chief Executive Officer, President, Secretary and Chairman of the Board of Directors of the Company. The Board approved and accepted Mr. Liu’s resignation from such positions on January 13, 2017.

 

Grants of Plan-Based Awards

 

We did not grant any plan based awards to executive officers in the year ended February 28, 2017.

 

Outstanding Equity Awards at Fiscal Year-End

 

None.

 

Option Exercises and Stock Vested

 

None.

 

Employment Agreements

 

We do not have any current employment agreements with our named executive officers.

 

Potential Payments upon Termination

 

None.

 

Compensation of Directors

 

No compensation was paid to any director (other than compensation set forth under Executive Compensation) for services rendered during the fiscal years ended February 28, 2017.

 

All directors receive reimbursement for reasonable out-of-pocket expenses in attending Board of Directors meetings and for promoting our business.

 

From time to time we may engage certain members of the Board of Directors to perform services on our behalf.  In such cases, we compensate the members for their services at rates no more favorable than could be obtained from unaffiliated parties.  

  

 

 

 

 16 
 

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information regarding the beneficial ownership of our common stock as of February 28, 2017 by the following persons:

 

  · each person who is known to be the beneficial owner of more than five percent (5%) of our issued and outstanding shares of common stock;

 

  · each of our directors and executive officers; and

 

  · all of our directors and executive officers as a group.

 

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. The number of shares and the percentage beneficially owned by each individual listed above include shares that are subject to options held by that individual that are immediately exercisable or exercisable within 60 days from February 28, 2017, and the number of shares and the percentage beneficially owned by all officers and directors as a group includes shares subject to options held by all officers and directors as a group that are immediately exercisable or exercisable within 60 days from February 28, 2017.

 

Name and Address of Beneficial Owner (1) 

Number of

Shares

Beneficially

Owned

  

Percentage

of Outstanding

Shares of

Common Stock (2)

 
Goldenrise Development, Inc.(3)   12,000,000    92.0% 
Derek Yu, President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Chairman of the Board   0    0.0% 
Michael Dunn, Director   0    0.0% 
Jie Lai, Director   0    0.0% 
All Directors and Officers as a Group   0    0.0% 

_______________

(1) Unless otherwise stated, the address is 927 Canada Ct., City of Industry, CA 91748.

 

(2)

Percent of Class is based on 13,043,230 shares issued and outstanding as of June 13, 2017. There are no shares of preferred stock issued and outstanding as of the date of this filing.

 

(3) Goldenrise Development, Inc. is a California corporation. Ni Li is the controlling officer and director of Goldenrise Devleopment and has voting and dispositive control over the 12,000,000 shares held by Goldenrise.

 

Changes in Control

As previously reported on Form 8-K, on March 31, 2017, Goldenrise Development, Inc., a California corporation (“Goldenrise”) and the “Company entered into a Stock Purchase Agreement (the “Agreement”) with Zhi Lu Peng, an individual (the “Purchaser”). Pursuant to the Agreement, Goldenrise agreed to sell and Purchaser agreed to purchase 12,000,000 restricted common stock shares of the Company (the “Shares”), representing approximately 92.12% of the Company’s outstanding shares of common stock. In consideration for the Shares, Purchaser will pay to Goldenrise a total of $400,000 as follows: (i) $100,000 upon the execution of the Agreement, and (ii) $300,000 on or before June 15, 2017 (the “Closing”). The Agreement is subject to certain customary conditions to Closing. 

  

The transaction contemplated by the Agreement would effectuate a change in control of the Company should it ultimately close. Purchaser would own approximately 92.12% of the Company's issued and outstanding common stock. There are no arrangements or understandings among members of both the former and new control groups and their associates with respect to election of officers or other matters. The foregoing description of the Agreement is not complete and is qualified in its entirety by reference to the full text thereof, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Commission on April 4, 2017.

 

Other than the foregoing, we are not aware of any arrangements that may result in "changes in control" as that term is defined by the provisions of Item 403(c) of Regulation S-K.

  

 

 

 

 17 
 

 

Securities Authorized for Issuance Under Equity Compensation Plans. The following provides information concerning compensation plans under which our equity securities are authorized for issuance as of February 28, 2017:

 

    (a)     (b)     (c)  
Plan Category   Number of securities to be issued upon exercise of outstanding options, warrants and rights     Weighted-average exercise price of outstanding options, warrants and rights     Number of Securities Remaining Available for future issuance under equity compensation plans (excluding Securities reflected in column (a))  
Equity compensation plans approved by security holders         $        
Equity compensation plans not approved by security holders (1)       –        –       131,875  
Total         $       131,875  

_______________

(1) 2014 Stock Incentive Plan. On January 27, 2014, our board of directors adopted the 2014 Stock Incentive Plan (“Plan”). The purpose of our Plan is to advance the best interests of the company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan is 150,000 shares, subject to adjustment. Our board of directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable and proper. Any decision made, or action taken, by our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive. The board of directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the Company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the Company. In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the Plan. Our board of directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our board of directors may deem appropriate and in our best interest. The maximum aggregate number of shares of common stock that may be issued and sold under all awards granted under the plan is 131,875 shares, and as of February 28, 2017, we have issued 18,125 shares under the Plan.  Since March 1, 2014, we have issued an aggregate 18,125 shares under the Plan.

  

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Director Independence

 

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which shares of common stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Director” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

According to the NASDAQ definition, Derek Yu is not an independent director because he is also an executive officer of the Company. According to the NASDAQ definition, Michael Dunn and Jie Lai are independent directors.

 

 

 

 

 18 
 

 

Related Party Transactions

 

In the past, Goldenrise has funded certain Company costs, and may pay for certain costs on behalf of the Company in the future. No firm commitments have been made to fund such costs. During the years ended February 28, 2017 and February 29, 2016, respectively, Goldenrise contributed $64,500 and $60,008 to fund business operations.

 

Other than the foregoing, none of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its Common Stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past fiscal year, or in any proposed transaction, which has materially affected or will affect the Company.

 

With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manner:

 

  · Disclosing such transactions in reports where required;
  · Disclosing in any and all filings with the SEC, where required;
  · Obtaining disinterested directors consent; and
  · Obtaining shareholder consent where required.

 

Review, Approval or Ratification of Transactions with Related Persons

 

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 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Appointment of Auditors

 

On April 30, 2015, the Company dismissed TAAD, LLP (“TAAD”) as its independent registered public accounting firm. The decision was approved by the Company’s Board of Directors effective April 30, 2015. Concurrently, on April 30, 2015 dbbmckennon was appointed as the Company’s independent registered public accounting firm.

 

dbbmckennon audited our financial statements for the fiscal years ended February 28, 2017 and February 29, 2016.

 

Audit Fees

 

dbbmckennon billed us $10,000 in fees for the audit of our financial statements for the year ended February 28, 2017 and $11,000 in fees for the audit of our financial statements for the year ended February 29, 2016.

 

dbbmckennon billed us an aggregate of $9,000 for the review of our quarterly financial statements for quarters ended May 31, 2016, August 31, 2016 and November 30, 2016. 

 

Audit Related Fees

 

None. 

 

Tax Fees

 

We have not yet incurred tax preparation fees for the year ended February 28, 2017 which we expect will be similar to 2016. We incurred tax preparation fees of $1,500 during 2016 in connection with the preparation of our tax returns for the years ended February 29, 2016.

 

 

 19 
 

 

All Other Fees

 

None.

 

Pre-Approval Policies and Procedures

 

We have implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, our board of directors pre-approves all services to be provided by dbbmckennon and the estimated fees related to these services.

 

All audit, audit related, and tax services were pre-approved by our board of directors, which concluded that the provision of such services dbbmckennon was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. Our pre-approval policies and procedures provide for the board of directors’ pre-approval of specifically described audit, audit-related, and tax services on an annual basis, but individual engagements anticipated to exceed pre-established thresholds must be separately approved. The policies and procedures also require specific approval by our board of directors if total fees for audit-related and tax services would exceed total fees for audit services in any fiscal year. The policies and procedures authorize the audit committee to delegate to one or more of its members pre-approval authority with respect to permitted services.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 20 
 

 

PART IV

 

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit No.   Description
2.1   Acquisition Agreement and Plan of Merger dated May 7, 2012, incorporated by reference to our Current Report on Form 8-K dated May 22, 2012.
3.1   Articles of Incorporation of Accend Media. (now known as Cloud Security Corp), incorporated by reference to our Registration Statement on Form S-1 filed on April 29, 2011
3.2   Bylaws,), incorporated by reference to our Registration Statement on Form S-1 filed on April 29, 2011
3.3   Articles of Amendment to Articles of Incorporation, incorporated by reference to our Current Report on Form 8-K dated May 22, 2012.
3.4   Articles of Merger incorporated by reference to our Current Report on Form 8-K dated May 22, 2012.
3.5   Articles of Merger, incorporated by reference to our Current Report on Form 8-K dated May 28, 2013.
10.1   Employment Agreement for Scott Gerardi, incorporated by reference to our Current Report on Form 8-K dated May 22, 2012.
10.2   Share Lock-Up Agreement with Safa Movassaghi, incorporated by reference to our Current Report on Form 8-K dated May 22, 2012.
10.3   Share Lock-Up Agreement with Scott Gerardi, incorporated by reference to our Current Report on Form 8-K dated May 22, 2012.
10.4   Share Lock-Up Agreement with Ira Lebovic, incorporated by reference to our Current Report on Form 8-K dated May 22, 2012.
10.5   Voting Trust Agreement, incorporated by reference to our Current Report on Form 8-K dated May 22, 2012.
10.6   Contract CTA Agreement with Wee Kai Ng, incorporated by reference to our Annual Report on Form 10-K for the year ended February 28, 2013.
10.7   Joint Venture Agreement, incorporated by reference to our Annual Report on Form 10-K for the year ended February 28, 2013.
10.8   Transfer Agreement dated December 3, 2013 between Cloud Security Corp. and App Ventures, Ltd., incorporated by reference to our Quarterly Report on Form 10-Q for the period ended November 30, 2013.
10.9   Distribution Agreement dated December 3, 2013 between Cloud Security Corp. and App Ventures, Ltd., incorporated by reference to our Current Report on Form 8-K filed on June 13, 2014.
10.10   Consulting Agreement dated December 3, 2013 between Cloud Security Corp. and Kerry Singh, incorporated by reference to our Quarterly Report on Form 10-Q for the period ended November 30, 2013.
10.11   2014 Stock Incentive Plan, incorporated by reference to our Registration Statement on Form S-8 filed on February 20, 2014.
10.12   Stock Purchase Agreement, dated December 8, 2014 between Cloud Security Corp. and Goldenrise Development, Inc., incorporated by reference to our Current Report on Form 8-K dated December 12, 2014.
10.13   Consulting Agreement, dated December 8, 2014 between Cloud Security Corp. and Safa Movassaghi, incorporated by reference to our Current Report on Form 8-K dated December 12, 2014.
31.1   Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer *
31.2   Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer *
32.1   Section 1350 Certification of Chief Executive Officer *
32.2   Section 1350 Certification of Chief Financial Officer *
101.INS   XBRL Instances 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

# Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 

 

 

 

 

 

 

 21 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

  CLOUD SECURITY CORPORATION  
     
Date: June 14, 2017 /s/ Derek Yu  
  Name: Derek Yu  
 

Title: Chief Executive Officer and President

(Principal Executive Officer), Chief Financial Officer

(Principal Financial and Accounting Officer)

 

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

 

Name   Title   Date
         
         
         
/s/ Derek Yu   President, Chief Executive Officer, Chief Financial Officer   June 14, 2017
    Secretary and Chairman of the Board    
         
         
/s/ Michael Dunn   Director   June 14, 2017
         
         
         
/s/ Jie Lai   Director   June 14, 2017

 

 

 

 

 

 

 

 

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CLOUD SECURITY CORP. Latest filings

Filing dateCompanyFormQuarterYear
2017-06-23CLOUD SECURITY CORP.8-K22017view
2017-06-14CLOUD SECURITY CORP.10-K22017view
2017-05-31CLOUD SECURITY CORP.NT 10-K22017view
2017-04-28CLOUD SECURITY CORP.522017view
2017-04-04CLOUD SECURITY CORP.8-K22017view
2017-01-17CLOUD SECURITY CORP.10-Q12017view
2017-01-13CLOUD SECURITY CORP.8-K12017view
2016-10-13CLOUD SECURITY CORP.10-Q42016view
2016-07-07CLOUD SECURITY CORP.10-Q32016view
2016-06-10CLOUD SECURITY CORP.10-K22016view