Notes to Condensed Financial Statements
March 31,
2014 (Unaudited)
NOTE 1
BUSINESS DESCRIPTION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unique Underwriters, Inc. (the
“Company”) is a national, independent insurance sales and marketing company located in the Mooresville, North Carolina
area. The Company was incorporated in the State of Texas on July 28, 2009.
Basis
of Presentation
The financial statements include
the accounts of Unique Underwriters, Inc. under the accrual basis of accounting.
Interim financial statements
The accompanying condensed
financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary
to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described
below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included
in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. These condensed financial statements should be read in conjunction with
a reading of the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K
annual report filed with the Securities and Exchange Commission (SEC) on October 15, 2013. Interim results of operations for the
three and nine months ended March 31, 2014 are not necessarily indicative of future results for the full year.
Management’s 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 revenues and expenses during the reporting periods. Actual results could differ from those estimates. The financial
statements above reflect all of the costs of doing business. The Company’s significant estimates include the valuation of
stock-based compensation.
Reclassification
Certain amounts in the prior years'
financial statements have been reclassified to conform with the current year presentation.
Cash and Cash Equivalents
- For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three
months or less to be cash equivalents.
Revenue Recognition
–
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes
revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue
realized or realizable and earned when all of the following criteria are met:
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(i)
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persuasive evidence of an arrangement exists,
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(ii)
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the services have been rendered and all required milestones achieved,
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(iii)
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the sales price is fixed or determinable, and
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(iv)
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Collectability is reasonably assured.
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The approval from the Company’s
insurance carriers, which occurs upon receipt of our commission check and the policy, is reviewed online, and related completion
of services to the client is an event that triggers revenue recognition.
The lead sales revenue
is recognized when one of our agents submits an order to rent leads and simultaneously their credit card is processed and the leads
are distributed to them. The Company recognizes revenue when the agent submits an order to rent the leads for 30 days. After thirty
days the leads become available for rental to another agent. Leads may be rented multiple times at decreasing rates due to the
lead’s age and number of times it has been rented.
Membership revenue
recognition occurs when an agent registers for one of the Company’s websites online and submits their payment information;
the agent must give 30 days notice of request to cancel their membership. The Company recognizes revenue related to our various
membership plans as income on a straight-line basis over the length of membership period.
The customer deposit
is strictly related to Executive Membership Package. After submitting a $500 deposit, an Executive Member can request that the
Company directly mail letters to new home owners and/or senior citizens to generate new direct mail response leads. The Company
refunds these deposits back to Executive Members when they no longer request that the Company directly mail letters to new home
owners and/or senior citizens to generate new direct mail response leads. However, the Executive Members may also apply these
deposits towards the leads sale or membership fees in the future. After the Executive Member cancels their direct mail service,
they have the choice to use these deposits for additional leads, request that the deposits be applied towards membership, or ask
for refunds. If deposits are used for additional leads, revenue is recognized when services are realized or realizable and earned.
If deposits are used for membership fees, revenue is recognized over the length of membership period. For the nine months ended
March 31, 2014, and 2013, the Company did not issue any refunds to Executive Members.
Cost of Sales
- The
Company’s policy is to recognize cost of sales in the same manner in conjunction with revenue recognition, when the costs
are incurred. Cost of sales includes the costs directly attributable to revenue recognition and include marketing and leads generation
costs, leads purchased costs and agent expenses.
Loss Per Share
–
Net
loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per
share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially
outstanding shares of common stock during each period. 2,258,621 shares of common stock underlying convertible debenture are not
included in the calculations of diluted loss per share, as the impact of the potential common shares would antidilutive.
Stock-Based Compensation
- The
Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of
the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity
to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value
of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide
service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized
for equity instruments for which employees do not render the requisite service.
Fair Value for Financial Assets
and Financial Liabilities-
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures
about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph
820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for
measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures
about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph
820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value
into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for
identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined
by Paragraph 820-10-35-37 are described below:
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Level 1
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Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
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Level 2
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Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
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Level 3
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Pricing inputs that are generally observable inputs and not corroborated by market data.
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The carrying amounts of the Company’s
financial assets and liabilities, such as cash, accounts receivable, rent deposit, accounts payable, customer deposits and notes
payable approximate their fair values because of the short maturity of these instruments.
The Company’s derivative liabilities
related to convertible debt are measured at fair value on a recurring basis, using level 3 inputs. There were no assets or liabilities
measured at fair value on a nonrecurring basis during the nine months ended March 31, 2014.
Recent Accounting Pronouncements
The Company has reviewed all recently
issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may
be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.
INCOME
TAXES
Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amount used for federal and state income tax purposes.
The Company’s deferred tax
asset at March 31, 2014 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating
to approximately $409,850 less a valuation allowance in the amount of approximately $409,850. Because of the Company’s lack
of earnings history, the deferred tax asset has been fully offset by a valuation allowance.
ASC 740-10 prescribes a recognition
threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on
recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.
The Company classifies interest and penalties as a component of interest and other expenses. To date, the Company has not been
assessed, nor has the Company paid, any interest or penalties.
The Company measures and records uncertain
tax positions by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may
be recognized or continue to be recognized. All of the Company's tax years are subject to examination.
At March 31, 2014, the Company
had federal and state net operating loss carry forwards of approximately $1,171,000 that expire in various years through the year
2034.
NOTE
2
FIXED ASSETS
Fixed assets were comprised of
the following as of March 31, 2014 and June 30, 2013:
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March 31, 2014
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June 30, 2013
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Cost:
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Furniture
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$
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3,371
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$
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3,371
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Computers
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1,315
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—
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Total
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4,686
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3,371
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Less: Accumulated depreciation
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969
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486
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Property and equipment, net
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$
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3,717
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$
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2,885
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Depreciation expense was $484 and $159
for the nine months ended March 31, 2014 and 2013, respectively.
NOTE 3
UNSECURED DEMAND LOAN PAYABLE
The balance of unsecured demand loan
was $0 and $250,000 as of March 31, 2014 and June 30, 2013, respectively. The funds borrowed from an unrelated party were to fund
the Company’s daily operations. The loan was unsecured, interest free and repayable currently. In February 2014, the company
was relieved of its obligations, which remain obligations of former officers and principal stockholders. Accordingly, the Company
recorded additional paid in capital of $255,000 for the nine months ended March 31, 2014.
NOTE 4
LOANS PAYABLE-RELATED PARTIES
Loans payable to related parties were
$0 and $45,484 as of March 31, 2014 and June 30, 2013, respectively. The funds borrowed from the Company’s related parties
were to fund the Company’s daily operations. The loan agreements were not evidenced by any promissory notes, but rather
verbal agreements between the related parties and the Company. The effects of imputed interest are immaterial to the financial
statements taken as a whole. On February 2014, the principal and accrued interest in total amount of $27,984 was forgiven by the
related parties. Accordingly, the Company recorded additional paid in capital of $27,984 in the accompanying statements of operations
for the nine months ended March 31, 2014.
NOTE 5
ADVANCES FROM THIRD PARTIES
During the nine months ended March
31, 2014, the company received advances from Yellowstone Capital, LLC totaling $26,831 to fund the Company’s daily operations.
The advances were due on demand and accrued interest at 15% plus fee per annum. During the nine months end March 31, 2014, the
company repaid $15,415 of principal and interest. In February 2014, the company was relieved of its obligation to repay the principal
and accrued interest in amount of $11,416, which remains an obligation of former officers and principal stockholders. Accordingly,
the Company recorded additional paid in capital of $11,416 for the nine months ended March 31, 2014.
During the nine months ended March
31, 2014, the company received advances from Horizon Business Funding, LLC totaling $14,500. The advances were due on demand and
accrued interest at 10% plus fee per annum. In February 2014, the company was relieved of its obligation to repay the principal
and accrued interest in amount of $11,120, which remains an obligation of former officers and principal stockholders. Accordingly,
the Company recorded additional paid in capital of $11,120 for the nine months ended March 31, 2014.
NOTE 6
CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES
On
August 15, 2013 Unique Underwriters, Inc. (the “Company”) issued an 8% convertible note in the principal amount of
$47,500 (the "Note") to an Accredited Investor (the “Lender").
The
Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on May 30, 2014. The Note
is convertible any time during the period beginning on the date which is one hundred eighty (180) days following the date of the
Note into common stock of the Company, at the Lender’s option, at a 42% discount to the average of the three lowest
closing bid prices of the common stock during the 10 Trading Day period prior to conversion as Trading Day is defined in the Note.
In the event the Company prepays the Note in full, the Company is required to pay off all principal, interest and any other
amounts owing multiplied by 135% if prepaid 121 days following the Issue Date through 180 days following the Issue Date. After
the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
The
Lender has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares
of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the
then issued and outstanding shares of common stock. The total net proceeds the Company received were $45,000, net of
attorney’s fees of $2,500.
The Company has determined that the
conversion feature of the Notes represent an embedded derivative since the Notes are convertible into a variable number of shares
upon conversion. Accordingly, the Notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion
feature must be bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of this
derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount
to the Notes. Such discount will be accreted from the grant date to the maturity date of the Notes. The change in the fair value
of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period,
with the offset to the derivative liability on the balance sheet. The beneficial conversion feature included in the Notes resulted
in an initial debt discount of $47,500 and an initial loss on the valuation of derivative liabilities of $10,491 based on the initial
fair value of the derivative liability of $57,991. The fair value of the embedded derivative liability was calculated at grant
date utilizing the following assumptions:
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Grant Date
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Fair Value
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Term
(Years)
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Assumed Conversion Price
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Market Price on Grant Date
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Volatility Percentage
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Risk-free
Rate
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8/15/2013
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$57,991
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0.75
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$0.058
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$0.1
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200%
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0.14%
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At March 31, 2014, the Company revalued
the embedded derivative liability. For the period from the grant date to March 31, 2014, the balance of derivative liability did
not change.
The fair value of the embedded derivative
liability was calculated at March 31, 2014 utilizing the following assumptions:
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Fair Value
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Term
(Years)
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Assumed Conversion
Price
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Volatility Percentage
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Risk-free
Rate
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$36,460
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0.13
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$0.029
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206%
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0.13%
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The carrying value of the Notes was $39,398 as of March
31, 2014, net of unamortized discount of $8,102. The Company recorded amortization of the debt discount in the amount of $28,358
during the period ended March 31, 2014. The accrued interest related to this note for the period ended March 31, 2014 is $2,735.
On
November 19, 2013 Unique Underwriters, Inc. (the “Company”) issued an 8% convertible note in the principal amount of
$18,000 (the "Note") to an Accredited Investor (the “Lender").
The
Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on August 21, 2014. The
Note is convertible any time during the period beginning on the date which is one hundred eighty (180) days following the date
of the Note into common stock of the Company, at the Lender’s option, at a 42% discount to the average of the three
lowest closing bid prices of the common stock during the 10 Trading Day period prior to conversion as Trading Day is defined in
the Note. In the event the Company prepays the Note in full, the Company is required to pay off all principal, interest and
any other amounts owing multiplied by 135% if prepaid 121 days following the Issue Date through 180 days following the Issue Date.
After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
The
Lender has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares
of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the
then issued and outstanding shares of common stock.
The Company has determined that the
conversion feature of the Notes represent an embedded derivative since the Notes are convertible into a variable number of shares
upon conversion. Accordingly, the Notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion
feature must be bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of this
derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount
to the Notes. Such discount will be accreted from the grant date to the maturity date of the Notes. The change in the fair value
of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period,
with the offset to the derivative liability on the balance sheet. The beneficial conversion feature included in the Notes resulted
in an initial debt discount of $18,000 and an initial loss on the valuation of derivative liabilities of $4,246 based on the initial
fair value of the derivative liability of $22,246. The fair value of the embedded derivative liability was calculated at grant
date utilizing the following assumptions:
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Grant Date
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Fair Value
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Term
(Years)
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Assumed Conversion Price
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Market Price on Grant Date
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Volatility Percentage
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Risk-free
Rate
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11/19/2013
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$22,246
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0.75
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$0.046
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$0.08
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201%
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0.14%
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At March 31, 2014, the Company revalued
the embedded derivative liability. For the period from the grant date to March 31, 2014, the balance of derivative liability did
not change.
The fair value of the embedded derivative
liability was calculated at March 31, 2014 utilizing the following assumptions:
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Fair Value
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Term
(Years)
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Assumed Conversion
Price
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Volatility Percentage
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Risk-free
Rate
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$13,817
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0.39
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$0.029
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205,78%
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0.13%
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The carrying value of the Notes was $11,092 as of March 31,
2014, net of unamortized discount of $6,908. The Company recorded amortization of the debt discount in the amount of $6,908 during
the period ended March 31, 2014. The accrued interest related to this note for the period ended March 31, 2014 was $521.
NOTE 7
CAPITAL STOCK
The Company is currently authorized
to issue 100,000,000 Class A preferred shares at $.001 par value per share with 10:1 conversion and voting rights. As of March
31, 2014, there was no Class A preferred shares issued and outstanding.
The Company is currently authorized
to issue 50,000,000 Class B preferred shares at $.001 par value per share with 1:1 conversion and voting rights. As of March 31,
2014, there was no Class B preferred shares issued and outstanding.
The Company is currently authorized
to issue 1,000,000,000 common shares at $.001 par value per share. As of March 31, 2014, there were 77,565,612 shares of common
stock issued and outstanding.
On September 20, 2013, the Company
issued as compensation for services provided a total of 30,000 common shares with a fair value of $3,300 to a third party. The
fair value of the shares was based on the price quoted on the OTC bulletin board on the grant date.
On November 1, 2013, the Company
issued 75,000 common shares with a market value of $7,500 as compensation for services provided. The fair value of the shares
was based on the price quoted on the OTC bulletin board on the grant date.
NOTE 8
LEASE
AND EMPLOYMENT COMMITMENTS AND RELATED PARTY TRANSACTION
The Company assumed and renewed its
office lease with an unrelated party. The lease was for five years and expires on April 30, 2018.
Effective as of March 14, 2014, the
control of registrant has been changed. The office location has been changed, and the lease agreement is no longer an obligation
to the Company. The Company recognized $9,688 of $35,981 rent expense for the three or nine months ended March 31, 2014, respectively.
In March, 2014, the agreement between the Company and Samuel,
and the agreement between the Company and Ralph have been terminated and cancelled. And they are not owed any amounts from the
Company.
NOTE 9
GOING CONCERN AND UNCERTAINTY
The Company has suffered recurring
losses from operations since inception and has a working capital deficit of $166,675, as of March 31, 2014. In addition, the Company
has yet to generate an internal cash flow from its business operations. These factors raise substantial doubt as to the ability
of the Company to continue as a going concern.
Management’s plans with
regard to these matters encompass the following actions: 1) obtain funding from new investors to alleviate the Company’s
working capital deficiency, and 2) implement a plan to generate sales. The Company’s continued existence is dependent upon
its ability to resolve it liquidity problems and increase profitability in its current business operations. However, the outcome
of management’s plans cannot be ascertained with any degree of certainty. The accompanying financial statements do not include
any adjustments that might result from the outcome of these risks and uncertainties.
