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Item 8. Financial Statements and Supplementary Data

2019-09-30 compared with 2018-09-05 · 137 added, 165 removed, 283 unchanged (52% of the section changed)

1 unchanged sentence

TO FINANCIAL STATEMENTS AND NOTES

of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Sheets as of June 30, 2019 and 2018

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of Cash Flows for the years ended June 30, 2019 and 2018

to the Financial Statements

Notes to the Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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doubt about the Company’s ability to continue as a going concern.

Further information and management’s plans

in regard to this uncertainty are also described in Note 1.

The financial statements do not include any adjustments that might

result from the outcome of this uncertainty.

Further information and management’s plans in regard

to this uncertainty are also described in Note 1.

The financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

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have served as the Company’s auditor since 2017.

September 04, 2018

CAPITAL CORPORATION

30, 2019 and 2018

& STOCKHOLDERS DEFICIT

Note Payable –

Roran, net of debt discount

Interest Payable

Current Liabilities

Stock par value $1.00, 10,000,000 shares authorized, 1,915,548 shares issued and outstanding

Paid-In Capital

Stockholders Deficit

LIABILITIES & STOCKHOLDERS DEFICIT

June 30, 2019

June 30, 2018

LIABILITIES & EQUITY

Current Liabilitites

Accounts Payable

Convertible Note Payable - Roran, net of debt discount

Accrued Interest Payable

Judgment Payable

Total Current Liabilities

Total Liabilities

Common Stock, $1.00 par value, 10,000,000 authorized,

1,915,548 shares issued and outstanding

Additional Paid-In Capital

Accumulated Deficit

(17,685,223 )

(28,110,948 )

(10,655,587 )

TOTAL LIABILITIES & EQUITY

accompanying Notes are an integral part of these Financial Statements.

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the years ended June 30, 2019 and 2018

and Unrealized Loss on Investments

Administrative

Weighted Average

Number of Common Shares Outstanding –

Basic and Diluted

Administrative Expenses

Interest expense

Total Expense

Net Loss from Operations

Gain on Extinguishment of Debt

Net Income (Loss)

Weighted Average Number of Common Shares Outstanding- Basic and Diluted

Net Income (Loss) Per Share- Basic and Diluted

accompanying Notes are an integral part of these Financial Statements.

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the years ended June 30, 2019 and 2018

Net Loss for the year

($1 Par Value)

Balance at June 30, 2017

$ (27,970,097 )

$ (10,574,869 )

Beneficial conversion feature

Net Loss for the year

Net loss for the period

Balance at June 30, 2018

(28,110,948 )

(10,655,587 )

Beneficial conversion feature

Net Income for the period

Balance at June 30, 2019

$ (17,685,223 )

accompanying Notes are an integral part of these Financial Statements.

3 unchanged sentences

the years ended June 30, 2019 and 2018

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Cash Flow from Operating Activities

Net income (loss)

Adjustments to reconcile Net income (loss) to net

cash used in operations:

Amortization of interest

Loss on investments and other assets

Depreciation and amortization expense

Gain on Extinguishment of Debt

(10,584,254 )

Changes in assets and liabilities

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Accrued Interest Payable

Net cash used in operating activities

Cash flows from investing activities:

Proceeds from sale/settlement of investments

Net cash provided by investing activities

Cash flows from financing activities:

Payments on SBA judgment

Roran Capital:

Loan from Roran

Roran Capital:

Note from Roran

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Cash, beginning of year

Cash, end of year

Supplemental disclosure of non-cash investing activity

Transfer of note receivable to SBA to settle part of accrued interest

Net cash used by operating activities

Cash flow from Financing Activities

Proceeds from convertible note payable

Net cash provided by financing

Net cash increase for period

Cash at beginning of period

Cash at end of period

Supplemental disclosure of non-cash financing activity

Intrinsic value of embedded beneficial conversion feature on convertible note payable

accompanying Notes are an integral part of these Financial Statements.

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Company has no operating assets of any value, and the Company no longer has the SBIC license from the SBA.

is clearly no longer operating as a registered investment company under the Investment Company Act.

The Company will now seek

to either (i) enter into a new business;

or, (ii) merge with, or otherwise acquire, an active business which would benefit from

operating as a public entity, and has undertaken a search to identify the best possible candidate(s) in order to provide value

to the shareholders of the Company.

The Company has filed with the SEC an Application

pursuant to Section 8(f) of the Investment Company Act of 1940 for an order declaring that the Company has ceased to be a registered

investment company.

In response to that filing, the SEC issued to the Company comments in a letter dated May 16, 2018.

responded to those comments with the filing of an Amended Application on June 4, 2018.

As of the date of this Annual Statement,

the Company has not received any response from the SEC in regard to the Amended Application.

The Company is clearly

no longer operating as a registered investment company under the Investment Company Act.

The Company will now seek to either (i)

enter into a new business;

or, (ii) merge with, or otherwise acquire, an active business which would benefit from operating as

a public entity, and has undertaken a search to identify the best possible candidate(s) in order to provide value to the shareholders

of the Company.

Company has filed with the SEC an Application pursuant to Section 8(f) of the Investment Company Act of 1940 for an order declaring

that the Company has ceased to be a registered investment company.

In response to that filing, the SEC issued to the Company comments

in a letter dated May 16, 2018.

The Company responded to those comments with the filing of an Amended Application on June 4, 2018

and most recently on August 26, 2019.

As of the date of this Annual Statement, the Company was still working through comments

from the SEC in regard to the Amended Application.

accompanying financial statements of our Company have been prepared in accordance with accounting principles generally accepted

in the United States.

The Company effectively ceased operations and it continues to have net losses through the date of

these financial statements.

Our financial statements have been presented on the basis that our business is a going concern, which

contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

We are subject to

the risks and uncertainties associated with a business with no operating business or assets and no revenue, as well as limitations

on our operating capital resources.

We have incurred operating losses and negative operating cash flows since the Receivership,

and we expect to continue to incur operating losses and negative operating cash flows at least through the near future.

which is a related party to the Company, has agreed to advance our Company funding in order to partially meet our most critical

The Company effectively ceased operations and it continues to have net losses through the date of these

financial statements.

Our financial statements have been presented on the basis that our business is a going concern, which contemplates

the realization of assets and the satisfaction of liabilities in the normal course of business.

We are subject to the risks and

uncertainties associated with a business with no operating business or assets and no revenue, as well as limitations on our operating

capital resources.

We have incurred operating losses and negative operating cash flows since the Receivership, and we expect to

continue to incur operating losses and negative operating cash flows at least through the near future.

Roran, which is a related

party to the Company, has previously agreed to advance our Company funding in order to partially meet our most critical

cash requirements.

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as a going concern.

Our independent registered public accounting firm, in its report on our 2018 financial statements, raised

substantial doubt about our ability to continue as a going concern.

Our financial statements as of and for the year ended June

30, 2018 do not contain any adjustments for this uncertainty.

Our independent registered public accounting firm, in its report on our 2019 financial statements,

raised substantial doubt about our ability to continue as a going concern.

Our financial statements as of and for the year ended

June 30, 2019 do not contain any adjustments for this uncertainty.

SIGNIFICANT ACCOUNTING POLICIES

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in the instrument.

Beneficial conversion feature –

The issuance of the convertible debt described in Note 4 generated a beneficial conversion feature (“BCF”), which

arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the

money at inception because the conversion option has an effective strike price that is less than the market price of the underlying

stock at the commitment date.

The Company recognized the BCF by allocating the intrinsic value of the conversion option, which

is the number of shares of common stock available upon conversion multiplied

conversion feature –

The issuance of the convertible debt described in Note 4 generated a beneficial conversion feature

(“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is not bifurcated

and is beneficial to the investor or in the money at inception because the conversion option has an effective strike price

that is less than the market price of the underlying stock at the commitment date.

The Company recognized the BCF by allocating

the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied

by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment

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into interest expense over the life of the related debt.

Company follows subtopic 850-10 of the FASB Accounting Standards Codification (“ASC”) for the identification

of related parties and disclosure of related party transactions.

to ASC 850-10-20 related parties include (a) affiliates (“Affiliate”

means, with respect to any specified Person,

any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common

control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act) of the Company;

entities for which investments in their equity securities would be required, absent the election of the fair value option under

the Fair Value Option Subsection of ASC 825–10–15, to be accounted for by the equity method by the investing

(c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship

of management;

(d) principal owners of the Company;

e) management of the Company;

(f) other parties with which the Company may

deal if one party controls or can significantly influence the management or operating policies of the other to an extent that

one of the transacting parties might be prevented from fully pursuing its own separate interests;

and (g) other parties that can

significantly influence the management or operating policies of the transacting parties or that have an ownership interest in

one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties

might be prevented from fully pursuing its own separate interests.

Company follows subtopic 850-10 of the FASB Accounting Standards Codification (“ASC”) for the identification of related

parties and disclosure of related party transactions.

CAPITAL CORPORATION

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Company follows ASC 450-20 to report accounting for contingencies.

Certain conditions may exist as of the date the financial

statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events

occur or fail to occur.

Management assesses such contingent liabilities, and such assessment inherently involves an exercise

In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted

claims that may result in such proceedings, management evaluates the perceived merits of any legal proceedings or un-asserted

claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

Certain conditions may exist as of the date the financial statements

are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or

fail to occur.

Management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may

result in such proceedings, management evaluates the perceived merits of any legal proceedings or un-asserted claims as well as

the perceived merits of the amount of relief sought or expected to be sought therein.

the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability

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Company adopted the provisions of ASC 740-10-25-13.

ASC 740-10-25-13 which addresses the determination of whether

tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.

740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that

the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that

has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.

ASC 740-10-25-13 also provides

guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires

increased disclosures.

The Company had no material adjustments to its liabilities for unrecognized income tax benefits according

to the provisions of ASC 740-10-25-13.

ASC 740-10-25-13 which addresses the determination of whether tax benefits

claimed or expected to be claimed on a tax return should be recorded in the financial statements.

Under ASC 740-10-25-13, the

Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position

will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized

in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty

percent (50%) likelihood of being realized upon ultimate settlement.

ASC 740-10-25-13 also provides guidance on de-recognition,

classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of ASC

740-10-25-13.

estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying

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subject to examination by tax authorities.

Loss Per Common Share

Income (Loss) Per Common Share

Company computes net income or loss per share in accordance with ASC 260 Earnings Per Share.

Under the provisions of the Earnings

per Share Topic ASC, basic net loss per share is computed by dividing the net loss available to common stockholders for the period

by the weighted average number of shares of common stock outstanding during the period.

The calculation of diluted net loss per

share gives effect to common stock equivalents;

however, potential common shares are excluded if their effect is anti-dilutive.

per Share Topic ASC, basic net income (loss) per share is computed by dividing the net income (loss)

available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the

The calculation of diluted net income (loss) per share gives effect to common stock equivalents;

potential common shares are excluded if their effect is anti-dilutive.

Issued Accounting Pronouncements

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not yet effective will not have a material impact on our financial position or results of operations upon adoption.

INVESTMENTS AND NOTES RECEIVABLE

Company’s legacy assets primarily consisted of prior investments that were composed of equity and debt securities that

were either in default or distressed in nature.

The Receiver liquidated the assets through negotiations and the investments

are written down to their estimated net realizable value through recognizing other-than-temporary impairment losses.

in the investment account is as follows:

Balance at June 30, 2016

Cash proceeds collected

Balance at June 30, 2017

June 30, 2018

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

part of a settlement on an investment, during the year ended June 30, 2016 the Receiver exchanged part of an investment for two

$75,000 notes receivable with consecutive 1 year terms.

The first note receivable was repaid in fiscal 2017.

The other $75,000

note receivable was transferred to the SBA to settle part of the accrued interest outstanding on the SBA judgment.

NOTES PAYABLE

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June 28, 2017, the Receivership was terminated and a final order entered by the Court provided Roran with control of the Company.

As of June 30, 2018, the Company’s outstanding judgment payable totaled $10,427,300, and interest payable totaled $156,933.

As of June 30, 2019, the Company’s outstanding judgment payable totaled $0 as the judgment had been satisfied in full.

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

The Company’s outstanding judgment payable

owed to the SBA was purchased by Roran from the SBA in July 2017.

As such, all amounts due under the outstanding judgment payable

are now owed to Roran rather than the SBA.

Upon purchase, the Company began to accrue interest that was due under the original

terms of the judgment payable.

The statutory interest rate is 0.094%.

The Company has accrued $9,385 in interest on the judgment

payable during the year ended June 30, 2018.

Company’s outstanding judgment payable owed to the SBA was purchased by Roran from the SBA in July 2017.

As such, all amounts

due under the outstanding judgment payable were owed to Roran rather than the SBA.

Upon purchase, the Company began

to accrue interest that was due under the original terms of the judgment payable.

The statutory interest rate was 0.094%.

Company satisfied the judgment in full as Roran agreed to forgive the judgment and as of June 30, 2019, recognized

a gain on extinguishment of debt of $10,584,254 which is fully offset by NOLs for income tax purposes.

September 19, 2017, the Company entered into a Convertible Loan Agreement with Roran (the “Loan Agreement”).

6 unchanged sentences

the share price.

On June 17, 2019, the Company amended its Loan Agreement and Promissory Note with Roran Capital as follows:

the total amount to be loaned was increased to $200,000, and (ii) the maturity date was extended to September 19, 2019, and a

further extension is being negotiated.

a result of the advances made pursuant to the Loan Agreement, the Company has incurred total obligations of $169,338 as

5 unchanged sentences

The debt discount has been amortized as interest expense through the maturity date.

5 - INVESTMENTS AND NOTES RECEIVABLE

Company’s legacy assets primarily consisted of prior investments that were composed of equity and debt securities.

the Receivership, the investments were either in default or distressed in nature.

The Receiver liquidated the assets through negotiations

and the investments were written down to their estimated net realizable value through recognizing other-than-temporary impairment

During the year ended June 30, 2016, the Receiver liquidated the remaining investment assets and recognized

a loss of $100,425.

part of a settlement on an investment, during the year ended June 30, 2016, the Receiver exchanged part of an investment for two

$75,000 notes receivable with consecutive 1 year terms.

The first note receivable was repaid during the period ended September

The other $75,000 note receivable was transferred to the SBA to settle part of the accrued interest outstanding on the

SBA judgment later in the 2017 fiscal year.

4 - RELATED PARTY TRANSACTIONS

following individuals and entities have been identified as related parties based on their family affiliation with our Chairman

of the Board:

following individuals and entities have been identified as related parties based on their family affiliation with our CEO

and Chairman of the Board:

following amounts were owed to related parties, affiliated with the CEO and Chairman of the Board, at the dates indicated:

Judgment Payable (acquired

by Roran from SBA)

Interest on Judgment

Convertible Note

Payable (See Note 4)

Interest on Convertible Note

4 unchanged sentences

were no disagreements with our accountants on accounting or financial disclosure matters during 2019 and 2018, respectively.

the past the Company was not required to engage an independent registered public accounting firm due to its status as a registered

In the past the Company was not required to engage an independent registered public accounting firm due to its status as a registered

investment company.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data