0001683168-16-000147.txt : 20160919 0001683168-16-000147.hdr.sgml : 20160919 20160919151116 ACCESSION NUMBER: 0001683168-16-000147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 45 CONFORMED PERIOD OF REPORT: 20160731 FILED AS OF DATE: 20160919 DATE AS OF CHANGE: 20160919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Trans-Pacific Aerospace Company, Inc. CENTRAL INDEX KEY: 0001422295 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 364613360 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55581 FILM NUMBER: 161891632 BUSINESS ADDRESS: STREET 1: 2975 HUNTINGTON DRIVE, SUITE 107 CITY: SAN MARINO STATE: CA ZIP: 91108 BUSINESS PHONE: 626-796-9804 MAIL ADDRESS: STREET 1: 2975 HUNTINGTON DRIVE, SUITE 107 CITY: SAN MARINO STATE: CA ZIP: 91108 FORMER COMPANY: FORMER CONFORMED NAME: Trans-Pacific Aerospace Co DATE OF NAME CHANGE: 20100601 FORMER COMPANY: FORMER CONFORMED NAME: PINNACLE ENERGY CORP. DATE OF NAME CHANGE: 20090129 FORMER COMPANY: FORMER CONFORMED NAME: Gas Salvage Corp. DATE OF NAME CHANGE: 20071231 10-Q 1 tpac_10q-073116.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended July 31, 2016

 

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________________ to _________________

 

Commission File No.: 000-55581

 

TRANS-PACIFIC AEROSPACE COMPANY, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 36-4613360

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

2975 Huntington Drive, Suite 107

San Marino, CA 91108

(Address of principal executive offices)

 

Issuer’s telephone number: (626) 796-7804

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed 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 days. Yes X     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). Yes X     No ___

 

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

 

Large accelerated filer [  ]          Accelerated filer [ ]

Non-accelerated filer [  ] (Do not check if a smaller reporting company)          Smaller reporting company [X]

 

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

 

As of September 7, 2016, 3,920,880,936 shares of our common stock were outstanding.

 

 

 

   

 

 

TRANS-PACIFIC AEROSPACE COMPANY, INC.

 

FORM 10-Q

 

July 31, 2016

 

TABLE OF CONTENTS

 

       Page
PART I-- FINANCIAL INFORMATION    
        
Item 1.  Financial Statements   F-1
   Unaudited Condensed Consolidated Balance Sheets as of July 31, 2016 and October 31, 2015   F-1
   Unaudited Condensed Consolidated Statements of Operations for three and nine months ended July 31, 2016 and 2015   F-2
   Unaudited Consolidated Statement of Stockholders’ Equity (Deficit) for the nine months ended July 31, 2016   F-3
   Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2016 and 2015   F-4
   Notes to the Unaudited Condensed Consolidated Financial Statements   F-5
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations   1
Item 3.  Quantitative and Qualitative Disclosures About Market Risk   3
Item 4  Control and Procedures   3
        
PART II-- OTHER INFORMATION    
        
Item 1  Legal Proceedings   4
Item 1A  Risk Factors   4
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds   4
Item 3.  Defaults Upon Senior Securities   5
Item 4.  Mine Safety Disclosures   5
Item 5.  Other Information   5
Item 6.  Exhibits   5
        
SIGNATURES   6

 

 

 

 

 i 

 

PART I-- FINANCIAL INFORMATION

ITEM 1 –FINANCIAL STATEMENTS

 

 

TRANS-PACIFIC AEROSPACE COMPANY, INC.

Consolidated Balance Sheets

 

   July 31   October 31, 
   2016   2015 
   (Unaudited)     
ASSETS        
Current assets          
Cash  $6,551   $6,833 
Accounts receivable   109,140     
Prepaid expenses       1,584 
Total current assets   115,691    8,417 
           
Non-Current assets          
Office equipment, net of accumulated depreciation of $5,605 and $4,702, respectively   2,801    3,704 
Security deposit   1,584    1,584 
Total non-current assets   4,385    5,288 
           
Total assets  $120,076   $13,705 
           
LIABILITIES AND STOCKHOLDERS' (DEFICIT)          
Current liabilities          
Accounts payable and accrued expenses  $210,022   $60,021 
Income taxes payable   1,951    1,951 
Accrued salary and payroll taxes   20,433    20,433 
Accrued interest payable       500 
Other payables - related parties   264,773    58,975 
Convertible note payable, net of discount       8,333 
Convertible note payable, currently in default   260,000    260,000 
Derivative liabilities - conversion option        
Total current liabilities   757,179    410,213 
           
Total liabilities   757,179    410,213 
           
Stockholders' (deficit)          
Preferred stock, par value $0.001, 5,000,000 shares authorized 4,007 and 2,945 shares issued and outstanding at July 31, 2016 and October 31, 2015, respectively   4    3 
Common stock, par value $0.001, 4,500,000,000 shares authorized 3,574,620,085 and 3,829,346,478 shares issued and outstanding at July 31, 2016 and October 31, 2015, respectively   3,574,620    3,829,346 
Additional paid-in capital   19,624,742    17,142,748 
Preferred stock to be issued   236,000     
Common stock to be issued   64,093    86,093 
Accumulated Deficit   (23,402,037)   (20,814,980)
Total Trans-Pacific Aerospace Company Inc. stockholders' equity   97,422    243,210 
Non-controlling interest in subsidiary   (734,525)   (639,718)
           
           
Total stockholders' (deficit)   (637,103)   (396,508)
           
Total liabilities and stockholders' (deficit)  $120,076   $13,705 

 

See accompanying notes to consolidated financial statements

 

 

 

 

 F-1 

 

 

TRANS-PACIFIC AEROSPACE COMPANY, INC.

Unaudited Consolidated Statements of Operations

 

   For the Three Months Ended July 31,   For the Nine Months Ended July 31,  
   2016   2015   2016   2015 
                 
Sales  $   $   $109,140   $ 
                     
Cost of sales                
                     
Gross profit           109,140     
                     
Operating expenses                    
Professional fees   7,220    24,385    30,335    100,895 
Consulting   269,400    74,500    2,337,000    173,500 
Other general and administrative   163,449    1,263,227    339,946    3,913,521 
                     
Total operating expenses   440,069    1,362,112    2,707,281    4,187,916 
                     
Operating loss from continuing operations   (440,069)   (1,362,112)   (2,598,141)   (4,187,916)
                     
Interest expense, net   (6,270)   (138,704)   (83,723)   (333,460)
Change in fair value of derivative liabilities       (6,476)       424,822 
Derivative expenses               (486,359)
                     
Net loss from continuing operations  $(446,339)  $(1,507,292)  $(2,681,864)  $(4,582,913)
                     
Discontinued operations                    
Net gain (loss) from discontinued operations                
                     
Loss before income taxes   (446,339)   (1,507,292)   (2,681,864)   (4,582,913)
                     
Income taxes                
                     
Net Loss  $(446,339)  $(1,507,292)  $(2,681,864)  $(4,582,913)
                     
Less: Loss attributable to non-controlling interest  $(41,205)  $(41,209)  $(94,807)  $(120,390)
                     
Net Loss attributable to the Company  $(405,134)  $(1,466,083)  $(2,587,057)  $(4,462,523)
                     
Basic and dilutive net loss from operations per share  $(0.00)  $(0.00)  $(0.00)  $(0.00)
                     
Weighted average number of common shares outstanding, basic and diluted   3,462,184,357    3,274,015,518    3,356,733,681    1,372,910,658 

 

 

See accompanying notes to consolidated financial statements

 

 

 

 

 F-2 

 

 

TRANS-PACIFIC AEROSPACE COMPANY, INC.

Consolidated Statement of Stockholders' Equity (Deficit)

 

 

 

    Preferred Stock     Common Stock     Additional Paid-In    Common Stock To Be    Preferred Stock To Be     Non Controlling      Accumulated          
     Shares      Amount      Shares      Amount     Capital    Issued    Issued     Interest      Deficit     Total  
Balances, October 31, 2014      $    179,447,431   $179,447   $15,461,785   $64,093        $(489,407)  $(16,064,350)   $ (848,432 )
                                                      
Common stock converted to preferred stock   767    1    (759,817,144)   (759,817)   759,817                          1  
                                                      
Preferred stock issued for services & compensation   1,203    1              644,999                         645,000  
                                                      
Common stock issued for cash             228,000,000    228,000    (18,000)                        210,000  
                                                      
Preferred stock issued for cash   250                  300,000    22,000                     322,000  
                                                      
Stocks issued in lieu of finders fees   725    1    57,019,761    57,020    (57,021)                          
                                                      
Common stock issued for services & compensation             387,000,000    387,000    38,000                          425,000  
                                                      
Common stock issued upon conversion of notes payable             3,737,696,430    3,737,696    (3,355,618)                         382,078  
                                                      
Conversion of derivative liability to common stock                       540,586                          540,586  
                                                      
Amortization of stock options                       2,760,000                          2,760,000  
                                                      
Imputed interest                       18,200                          18.200  
                                                      
Note discount                       50,000                          50,000  
                                                      
Assignment of convertible notes to officer                                                  
                                                      
Loss on Minority interest                                      (150,311)          (150,311 )
                                                      
Net loss from continuing operations for the year ended October 31, 2015                                            (4,750,630)     (4,750,630 )
                                                      
Balances, October 31, 2015   2,945   $3    3,829,346,478   $3,829,346   $17,142,748   $86,093   $#  $(639,718)  $(20,814,980)   $ (396,508 )
                                                      
Common stock converted to preferred stock   694    1    (692,943,784)   (692,944)   692,943                           
                                                      
Preferred stock converted to common stock   (513)   (1)   513,000,000    513,000    (513,000)                         (1 )
                                                      
Preferred stock issued for services & compensation   664    1              2,062,798                          2,062,799  
                                                      
Preferred stock issued for cash   225                  24,500    (22,000)   236,000                238,500  
                                                      
Common stock issued for services & compensation             29,000,000    29,000    52,600                          81,600  
                                                      
Common stock issued upon conversion of other payables             97,217,391    97,218    (52,497)                         44,721  
                                                      
Common stock retired             (201,000,000)   (201,000)   201,000                           
                                                      
Preferred stock retired   (8)                                            
                                                      
Imputed interest                       13,650                          13,650  
                                                      
Loss on Minority interest                                      (94,807)          (94,807 )
                                                      
Net loss from continuing operations for the Nine months ended July 31, 2016                                           (2,587,057)     (2,587,057 )
                                                      
Balances, July 31, 2016 (Unaudited)   4,007   $4    3,574,620,085   $3,574,620   $19,624,742   $64,093   $236,000#  $(734,525)  $(23,402,037)   $ (637,103 )

 

See accompanying notes to consolidated financial statements

 

 F-3 
 

 

 

TRANS-PACIFIC AEROSPACE COMPANY, INC.

Unaudited Consolidated Statements of Cash Flows

 

   For the Nine Months Ended July 31,  
   2016   2015 
 Cash flows from operating activities:          
 Net Loss  $(2,681,864)  $(4,582,913)
 Adjustments to reconcile net loss to net cash used in operating activities:          
 Stock based compensation   2,144,398    3,607,500 
 Amortization of debt discount   41,667    289,976 
 Imputed interest expense   13,650    13,650 
 Change in fair value of derivative liabilities       (424,822)
 Derivative expense       486,359 
 Interest converted to common stock   1,720    15,179 
 Interest paid by shareholder   27,186     
 Depreciation expense   903    903 
 Change in operating assets and liabilities:          
 Accounts receivable   (109,140)    
 Prepaid and deferred expenses   1,584    (2,376)
 Accounts payable and accrued expenses   150,001    2,236 
 Accrued interest payable   (500)   (3,722)
 Net cash used in operating activities   (410,395)   (598,030)
           
 Cash flows from financing activities:          
 Common stock issued for cash       510,000 
 Preferred stock sold for cash   238,500    22,000 
 Convertible note issued for cash       160,500 
 Repayment of convertible notes       (48,000)
 Other payables - related parties   171,613    (725)
 Net cash provided by financing activities   410,113    643,775 
           
 Net increase / decrease in cash   (282)   45,745 
 Cash, beginning of the period   6,833    50,089 
           
 Cash, end of the period  $6,551   $95,834 
           
 Supplemental cash flow disclosure:          
 Interest paid  $   $ 
 Income taxes paid  $   $ 
           
 Supplemental disclosure of non-cash transactions:          
 Common stock issued for payment on outstanding liabilities  $44,720   $49,892 
 Common stock issued for conversion of notes payable  $   $382,077 
 Conversion of derivative liability to common stock  $   $511,339 
 Retirement of common shares  $201,000   $ 
 Note and interest paid by shareholder  $77,186   $ 
 Derivative liabilities  $   $23,089 

 

See accompanying notes to consolidated financial statements

 

 

 

 

 F-4 

 

 

Trans-Pacific Aerospace Company, Inc.

Notes to Unaudited Consolidated Financial Statements

July 31, 2016

 

NOTE 1 – BACKGROUND AND ORGANIZATION

 

Organization

 

The Company was incorporated in the State of Nevada on June 5, 2007, as Gas Salvage Corp. for the purpose of engaging in the exploration and development of oil and gas. In July 2008, the Company changed its name to Pinnacle Energy Corp. On February 1, 2010, the Company completed the acquisition of the aircraft component part design, engineering and manufacturing assets of Harbin Aerospace Company, LLC (“HAC”). The transaction was structured as a business combination. Following completion of the HAC acquisition, the Company’s Board of Directors decided to dispose of the oil and gas business interests and focus on the aircraft component market. On February 10, 2010, the Company completed the sale of all of its oil and gas business interests in exchange for cancellation of all obligations under an outstanding promissory note having a principal amount of $1,000,000. Pursuant to Financial Accounting Standards Board (FASB) standards, the Company has retro-actively presented its oil and gas business as discontinued operations.

 

In March 2010, the Company changed its name to Trans-Pacific Aerospace Company, Inc.

 

On July 27, 2008, the Company completed a three-for-one stock split of the Company’s common stock. The share and per-share information disclosed within this Form 10-Q reflect the completion of this stock split.

 

On April 5, 2013, the Company entered into Securities Purchase Agreements to purchase additional capital stock of Godfrey (China) Limited (“Godfrey”), the Company’s 25%-owned Hong Kong subsidiary engaged in the development of the production facility in Guangzhou, China. On June 21, 2013, upon closing of the transactions under the Securities Purchase Agreements, the Company increased its ownership of Godfrey from 25% to 55%.

 

Business Overview

 

The Company’s aircraft component business commenced on February 1, 2010. To date, its operations have focused on product design and engineering. The Company has recently commenced commercial manufacture or sales of its products.

 

The Company designs, manufactures and sells aerospace quality component parts for commercial and military aircraft, space vehicles, power plants and surface and undersea vessels. These parts have applications in both newly constructed platforms and as spares for existing platforms. The Company’s initial products are self-lubricating spherical bearings that help with several flight-critical tasks, including aircraft flight controls and landing gear.

 

Going Concern

 

The Company's financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America, and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company incurred a net loss from operations of $2,681,864 during the nine months ended July 31, 2016, and an accumulated deficit of $23,402,037 at July 31, 2016. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.

 

Management’s plans to continue as a going concern include raising additional capital through sales of common stock and/or a debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The Company anticipates that losses will continue until such time, if ever, that the Company is able to generate sufficient revenues to support its 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-5 

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S.) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and reflect all adjustments, consisting of normal recurring adjustments and other adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company, for the respective periods presented. The results of operations for an interim period are not necessarily indicative of the results that may be expected for any other interim period or the year as a whole. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended October 31, 2015, filed with the SEC on February 16, 2016.

 

Consolidation

 

Accounting policies used by the Company and the Company’s subsidiaries conform to US GAAP. Significant policies are discussed below. The Company’s consolidated accounts include the Company’s accounts and the accounts of the Company’s subsidiaries of which we own a 50% interest or greater.

 

These consolidated financial statements include the accounts of the parent company Trans-Pacific Aerospace Company, Inc., and the majority owned subsidiary: Godfrey. All intercompany transactions have been eliminated.

 

Non-controlling interests

 

The Company accounts for changes in our controlling interests of subsidiaries according to Accounting Codification Standards 810 – Consolidations (“ASC 810”). ASC 810 requires that the Company record such changes as equity transactions, recording no gain or loss on such a sale.

 

The Company’s non-controlling interest arises from the purchase of equity in Godfrey. It represents the portion of Godfrey that is not owned. ASC 810 requires that the Company account for the equity and income or loss on that operation separately from the Company’s other activities. In the equity section of the Consolidated Balance Sheet, the Company presents the portion of the negative equity attributable to non-controlling interests in Godfrey. In the Consolidated Statement of Operations, the Company presents the portion of current period net loss in Godfrey attributable to non-controlling interests.

 

Use of Estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at July 31, 2016 and October 31, 2015.

 

Concentration of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.

 

 

 

 F-6 

 

 

Impairment of Long-Lived Assets

 

The Company has adopted FASB Accounting Standards Codification (ASC) 360-10, Property, Plant and Equipment FASB ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

 

Indefinite-lived Intangible Assets

 

The Company has an indefinite-lived intangible asset (goodwill) relating to purchased blueprints, formulas, designs and processes for manufacturing and production of self-lubricated spherical bearings, bushings and rod-end bearings. The indefinite-lived intangible asset is not amortized; rather, it is tested for impairment at least annually by comparing the carrying amount of the asset with the fair value. An impairment loss is recognized if the carrying amount is greater than fair value.

 

Fair Value of Financial Instruments

 

The Company adopted FASB ASC 820 on October 1, 2008. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has various financial instruments that must be measured under the new fair value standard including: cash and debt. The Company currently does not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

Cash, accounts payable, other payables, and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.

 

 

 

 F-7 

 

 

The following tables provide a summary of the fair values of assets and liabilities:

 

       Fair Value Measurements at 
       July 31, 2016 
    Carrying Value July 31, 2016    Level 1    Level 2     Level 3  
Liabilities:                    
Convertible notes payable – currently in default  $260,000   $   $   $260,000 

 

       Fair Value Measurements at 
       October 31, 2015 
    Carrying Value October 31, 2015    Level 1    Level 2     Level 3  
Liabilities:                    
Convertible notes payable, net  $8,333   $   $   $8,333 
Convertible notes payable – currently in default  $260,000   $   $   $260,000 

 

The Company believes that the market rate of interest as of July 31, 2016 and October 31, 2015 was not materially different to the rate of interest at which the convertible notes payable were issued. Accordingly, the Company believes that the fair value of the convertible notes payable approximated their carrying value at July 31, 2016 and October 31, 2015 due to short term maturity.

 

Revenue Recognition

 

We received the initial order for our spherical bearings in December 2015. We manufactured and delivered these bearings in March 2016. The Company recognizes revenue on sales of products when the goods are delivered and title to the goods passes to the customer provided that: (i) there are no uncertainties regarding customer acceptance; (ii) persuasive evidence of an arrangement exists; (iii) the sales price is fixed and determinable; and (iv) collectability is reasonably assured.

 

Income Taxes

 

The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.

 

The accounting guidance for uncertainties in income tax prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company recognizes a tax benefit from an uncertain tax position in the consolidated financial statements only when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority’s widely understood administrative practices and precedents.

 

Equipment

 

Equipment is recorded at cost and depreciated using straight line methods over the estimated useful lives of the related assets. The Company reviews the carrying value of long-term assets to be held and used when events and circumstances warrant such a review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. The cost of normal maintenance and repairs is charged to operations as incurred. Major overhaul that extends the useful life of existing assets is capitalized. When equipment is retired or disposed, the costs and related accumulated depreciation are eliminated and the resulting profit or loss is recognized in income. As of July 31, 2016, the useful lives of the office equipment ranged from five years to seven years.

 

 

 

 F-8 

 

 

Issuance of Shares for Non-Cash Consideration to Non-Employees

 

The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services received or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. 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.

 

Stock-Based Compensation

 

Stock-based compensation cost to employees is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC 718. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit.

 

Net Loss Per Share

 

The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised. There were convertible notes, 4,007 shares of convertible preferred stock, 2,000,000 Series A Warrants, 2,000,000 Series B Warrants and options for 140,666,667 shares outstanding as of July 31, 2016 that are not included in the calculation of Diluted EPS as their impact would be anti-dilutive.

 

   For the Nine Months Ended
July 31,
 
   2016   2015 
         
Net loss attributable to the Company  $(2,587,057)  $(4,462,523)
           
Basic and diluted net loss from operations per share  $(0.00)  $(0.00)
           
Weighted average number of common shares outstanding,
basic and diluted
   3,356,733,681    1,372,910,658 

 

 

Recently Adopted and Recently Enacted Accounting Pronouncements

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders' equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 during the quarter ended May 31, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

 

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.

 

In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).

 

 

 

 F-9 

 

 

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

 

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

 

  a. Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)
     
  b. Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
     
  c. Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

 

  a. Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern
     
  b. Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
     
  c. Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

 

In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.

 

In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this Update defer the effective date of ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

 

 

 F-10 

 

 

NOTE 3 – ACCOUNTS RECEIVABLE

 

All accounts receivable are due 90 days from the date billed based on the Company’s collection policy and agreed by the customer. As of July 31, 2016 and October 31, 2015, the Company had accounts receivable balance of $109,140 and $0, respectively.

 

In May 2016, the Company entered into a Service Level Agreement with a Hong Kong entity pursuant to which it agreed to assist such Hong Kong entity to develop a market for medical, aerospace and other machined products in China and elsewhere. The Company will assist such entity with the manufacture of these products to service these markets. The Company agreed to grant such entity a license to market these products under the TPAC name. This agreement has a term of 10 years and be automatically renewable in annual periods unless terminated earlier. The Company shall be paid $1 million annually for time actually spent performing its duties under this Agreement. Further, the Hong Kong entity agreed to purchase from the Company all raw materials, tooling, machinery and equipment, blueprints, engineering, marketing, operations and management and all other services and supplies. The Company agreed not to solicit any employee or consultant of the Hong Kong entity for a period of 3 years following termination of the Agreement.

 

In May 2016, the Company entered into a Licensing and Consulting Services Agreement with an Australian entity pursuant to which it agreed to assist such Australian entity to develop a market for aerospace bearings in Australia, Southern Asia (except China), Asia and Africa. The Company will assist such entity with the manufacture of these products to service these markets. The Company agreed to grant such entity a license to market these products under the name of TPAC Australia. This agreement has a term of 1 year and be automatically renewable in annual periods unless terminated earlier. The Company shall be paid $1 million annually for time actually spent performing its duties under this Agreement. The Company agreed not to solicit any employee or consultant of the Australian entity for a period of 3 years following termination of the Agreement.

 

The Company will recognize the licensing income from these agreements upon receipt of payments.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

As of July 31, 2016 and October 31, 2015, the Company had office equipment of $2,801 and 3,704, net of accumulated depreciation of $5,605 and $4,702, respectively. For the nine months ended July 31, 2016 and 2015, the Company recorded depreciation expenses of $903 and $903, respectively.

 

NOTE 5 - RELATED PARTY TRANSACTIONS

 

Due to lack of sufficient funding to maintain the Company’s operations, the Company’s officers and directors loaned money to the Company for short term cash flow needs. As of July 31, 2016 and October 31, 2015, Mr. Peter Liu had payables due to him from Godfrey of $60,000 and $60,000; respectively; The Company had receivables due from HAC amounted to $938 and $1,025 at July 31, 2016 and October 31, 2015, respectively.

 

During the nine months ended July 31, 2016, the Company borrowed $171,525 from various shareholders under oral agreements. This amount bears no interest and is due on demand. In addition, a shareholder made repayment of $77,186 on behalf of the Company to pay off the Apollo Note as described in Note 6 below. The amount is recorded under related party payable and the amount bears no interest and is due on demand. In July 2016, $43,000 of the principal amount was converted to 97,217,391 shares of the Company’s common stock. As of July 31, 2016, the outstanding balance was $205,711.

 

As of July 31, 2016 and October 31, 2015, the total outstanding amount due to related parties was $264,773 and $58,975, respectively.

 

NOTE 6 – CONVERTIBLE NOTES PAYABLE

 

As part of the acquisition of HAC, the Company assumed $260,000 of obligations under a convertible note. The convertible note assumed by the Company does not bear interest and became payable on March 12, 2011. The note is convertible into shares of the Company’s common stock at an initial conversion price of $0.25 per share. The conversion price is subject to adjustment for stock splits and combinations; certain dividends and distributions; reclassification, exchange or substitution; reorganization, merger, consolidation or sales of assets. As the convertible note does not bear interest, the Company recorded the present value of the convertible note obligation at $239,667 and accordingly recorded a convertible note payable for $260,000 and a corresponding debt discount of $20,333. Under the effective interest method, the Company accretes the note obligation to the face amount of the convertible note over the remaining term of the note. The discount was fully amortized at March 12, 2011. Debt discount expense totaled $7,452 and $12,880 for the years ended October 31, 2011 and 2010 respectively. The Company performed an evaluation and determined that the anti-dilution clause did not require derivative treatment. On September 16, 2011, the Company entered into an agreement with the note holder to extend the maturity date of the note. Pursuant to the agreement, the entire outstanding amount became fully due and payable on December 31, 2011. The note is now currently in default. For the nine months ended July 31, 2016 and 2015, the Company recorded imputed interest of $13,650 and $13,650, respectively.

 

 

 

 F-11 

 

 

During the year ended October 31, 2014, we entered into Securities Purchase Agreements with various accredited and sophisticated investors, pursuant to which we sold Convertible Promissory Notes with interest rates ranging from 8% to 12%, in the original principal amount of $325,000 (the “Notes”). The Notes have maturity date of six months or one year from the issuance date and are convertible into our common stock, at any time after 180 days, at a price for each share of common stock equal to 50% to 60 % of the lowest closing bid price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on formulas specified in the agreements.

 

The issuances of the Notes were exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Rule 506 of Regulation D promulgated thereunder. The purchasers were accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the Notes for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Notes issued. During the year ended October 31, 2014, the Company repaid $112,500 of the principal amount of the Notes.

 

During the six months ended April 30, 2015, six of the above convertible notes with total principal amount of $212,500 reached the 180 days and the conversion options became derivative liabilities. Using the Black-Scholes Model, the Company calculated the fair value of the conversion options and recorded derivative liabilities on the 180 day and April 30, 2015. The change in fair value was recorded as derivative expenses.

 

On June 13, 2014, we entered into Securities Purchase Agreements with Tangiers Investment Group LLC, pursuant to which we sold a 10% Convertible Promissory Note, in the original principal amount of $55,000 (the “Tangiers Note”). The Tangiers Note has a maturity date of June 13, 2015 and is convertible into our common stock, at any time at a price for each share of common stock equal to 60 % of the lowest closing bid price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreement.

 

On November 25, 2014, we entered into Securities Purchase Agreements with Tangiers Investment Group LLC, pursuant to which we sold a 10% Convertible Promissory Note, in the original principal amount of $27,500 (the “Tangiers Note 2”). The Tangiers Note 2 has a maturity date of November 25, 2015 and is convertible into our common stock, at any time at a price for each share of common stock equal to 60% of the lowest closing bid price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreement.

 

The issuance of the Tangiers Note 2 was exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the Tangiers Notes for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Tangiers Notes issued. The Company then calculated the fair value of the conversion option and recorded derivative liability on the issuance date and the subsequent period end dates.

 

On November 10, 2014, we entered into Securities Purchase Agreements with Auctus Private Equity Funds, LLC, pursuant to which we sold an 8% Convertible Promissory Note, in the original principal amount of $40,000 (the “Auctus Note”). The Auctus Note has a maturity date of November 10, 2015 and is convertible into our common stock, at any time at a price for each share of common stock equal to 55 % of the average of the lowest three (3) trading prices of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreement.

 

The issuance of the Auctus Note was exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the Auctus Note for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Auctus Note issued. The Company then calculated the fair value of the conversion option and recorded derivative liability on the issuance date and the subsequent period end dates.

 

 

 

 F-12 

 

 

On February 23, 2015, we entered into Securities Purchase Agreements with KBM Worldwide, Inc., pursuant to which we sold an 8% Convertible Promissory Note, in the original principal amount of $48,000 (the “KBM Note”). The KBM Note has a maturity date of October 9, 2015 and is convertible into our common stock, at any time after 180 days, at a price for each share of common stock equal to 55 % of the average of the lowest three (3) trading prices during the ten trading days prior to the conversion date of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreement.

 

The issuance of the KBM Note was exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the KBM Note for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Notes issued.

 

In March and April 2015, we entered into Securities Purchase Agreements with various accredited and sophisticated investors, pursuant to which we sold 8% Convertible Promissory Notes, in the original principal amount of $45,000 (the “New Note”). The New Notes have maturity dates of June 12 and October 24, 2015 and are convertible into our common stock, at any time at a price for each share of common stock equal to 55 % or 60% of the lowest closing price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreements.

 

The issuances of the New Notes were exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchasers were accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the New Notes for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the New Notes issued. The Company then calculated the fair value of the conversion option and recorded derivative liability on the issuance date and the subsequent period end dates.

 

In September 2015, the Company entered into a Securities Purchase Agreement with Apollo Capital Corp, pursuant to which we sold a 12% Convertible Promissory Note, in the original principal amount of $50,000 (the “Apollo Note”). The Apollo Note has maturity date of March 29, 2016 and are convertible into our common stock, at any time after 180 days, at a price for each share of common stock equal to 40% of the lowest closing price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreements.

 

The issuance of the Apollo Note was exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the Apollo Note for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Notes issued. On February 12, 2016, a shareholder made repayment of $77,186 on behalf of the Company to pay off the Apollo Note.

 

During the years ended October 31, 2015, $382,077 of the convertible notes was converted to 3,737,696,430 shares of the Company’s common stock.

 

For the nine months ended July 31, 2016 and 2015, the Company recorded derivative expense of $0 and $55,062, respectively. As of July 31, 2016 and October 31, 2015, the derivative liability was fully converted or paid off.

 

As of July 31, 2016 and October 31, 2015, the outstanding amount of the convertible notes were $0 and $8,333, net of discount of $0 and $41,667, respectively.

 

 

 

 F-13 

 

 

NOTE 7 - COMMITMENTS AND CONTINGENCIES

 

Consulting Agreements

 

The Company has entered into consulting agreements for services to be provided to the Company in the ordinary course of business. These agreements call for expense reimbursement and various payments upon performance of services.

 

On February 1, 2016, the Company entered into a consulting service agreement with Mr. Nicholas Nguyen for a period of 24 months. Upon execution of this agreement, the Company shall issue total of 100 shares of its convertible preferred stock as compensation for Mr. Nguyen’s services. As of July 31, 2016, the shares had not been issued and the Company recorded accrued expense of $150,000.

 

On February 22, 2016, the Company entered into an agreement with Ms. Lixin Chen to perform marketing and operation consulting services for the year ended December 31, 2016. Upon execution of this agreement, the Company shall issue total of 300 shares of its convertible preferred stock as compensation for Ms. Chen’s services. The Company issued the shares in May and recorded $1,260,000 as consulting fee for nine months ended July 31, 2016.

 

Employment Agreements

 

On February 1, 2010, the Company entered into an Employment Agreement with William McKay. Under the agreement, Mr. McKay will receive a base salary of $180,000, plus an initial bonus of 1,200,000 shares of the Company’s common stock (to be issued in 300,000 share blocks on a quarterly basis). The shares were valued based on the closing stock price on the date of the agreement. The initial term of the Employment Agreement expired on January 31, 2011 and automatically renewed for an additional one-year term. The agreement ended January 31, 2013 and Mr. McKay agreed to continue serve as the Company’s CEO without base salary. As of July 31, 2016 and October 31, 2015, the total accrued salaries owed to Mr. McKay were $0.

 

Lease Agreement

 

In October 2010, the Company entered into a lease of its administrative offices. The lease expired November 30, 2012 and currently calls for monthly rental payments of $970 pursuant to a month to month agreement.

 

NOTE 8 – CAPITAL STOCK TRANSACTIONS

 

Preferred Stock

 

The Company is authorized to issue up to 5,000,000 shares of its $0.001 preferred stock.

 

In June 2015, the Company designated 20,000 of the authorized preferred stock as convertible preferred stock with the following characteristics:

 

       i.          Each share of Preferred Stock would be convertible into 1,000,000 shares of Common Stock at the Preferred Stock holders’ option, subject to restrictions regarding timing, volume and common share availability.

 

      ii.          In shareholder votes, each share of Preferred Stock would have voting power equal to 1,000,000 shares of Common Stock.

 

During the year ended October 31, 2015, 759,817,144 shares of common stock were retired and converted to 767 shares of convertible preferred stock. In addition, the Company issued 1,203 shares of convertible preferred stock to its employee and consultants for services rendered. These shares were value at $645,000 based on closing price of the underlying common stock if converted.

 

In June 2015, the company entered into various purchase agreements with accredited investors for the sale of 220 shares of its convertible preferred stock at a price of $100 per share. Total cash proceeds from the sale of stock were $22,000 which was recorded as stock to be issued.

 

During the year ended October 31, 2015, the company entered into various purchase agreements with an accredited investor for the sale of 478,000,000 shares of its common stock at a price ranged from $0.00035 to $0.0012 per share. Total cash proceeds from the sale of stock during the year ended October 31, 2015, was $510,000. As of October 31, 2015, the Company issued 228,000,000 shares of common stock and 250 shares of preferred stock in lieu of 250,000,000 shares of common stock. In connection with these stock purchase agreements, the Company issued 57,019,761 shares of common stock and 725 shares of preferred stock in lieu of finders’ fees, which represents stock offering costs. Finders’ fees are treated as a reduction in paid in capital per current accounting guidance.

 

 

 

 F-14 

 

 

During the nine months ended July 31, 2016, 692,943,784 shares of common stock were retired and converted to 694 shares of convertible preferred stock and 513 shares of preferred stock were converted to 513,000,000 shares of common stock. In addition, the Company issued 664 shares of convertible preferred stock to its employee and consultants for services rendered. These shares were value at $2,062,798 based on closing price of the underlying common stock if converted.

 

During the nine months ended July 31, 2016, 8 shares of preferred stock were retired and cancelled.

 

In February 2016, the Company issued 220 shares of preferred stock to an accredited investor in lieu of 220,000,000 shares of common stock sold in June 2015.

 

During the nine months ended July 31, 2016, the Company sold 414 shares of its preferred stock for $238,500. As of July 31, 2016, 409 of these shares had not been issued and were recorded as preferred stock to be issued.

 

At July 31, 2016 and October 31, 2015, there were 4,007 and 2,945 shares issued and outstanding, respectively.

 

Common Stock

 

The Company is authorized to issue up to 4,500,000,000 shares of its $0.001 common stock.

 

At July 31, 2016 and October 31, 2015, there were 3,574,620,085 and 3,829,346,478 shares issued and outstanding, respectively.

 

Fiscal year 2015:

 

During the year ended October 31, 2015, the Company issued 387,000,000 shares of common stock for legal and consulting services rendered. The shares were valued at $425,000 based on service invoice and the closing stock prices on the dates of the stock grants.

 

During the year ended October 31, 2015, the Company entered into various purchase agreements with an accredited investor for the sale of 478,000,000 shares of its common stock at a price ranged from $0.00035 to $0.0012 per share. Total cash proceeds from the sale of stock during the year ended October 31, 2015, was $510,000. As of October 31, 2015, the Company issued 228,000,000 shares of common stock and 250 shares of preferred stock in lieu of 250,000,000 shares of common stock. In connection with these stock purchase agreements, the Company issued 57,019,761 shares of common stock and 725 shares of preferred stock in lieu of finders’ fees, which represents stock offering costs. Finders’ fees are treated as a reduction in paid in capital per current accounting guidance.

 

During the year ended October 31, 2015, the Company also issued 3,737,696,430 shares upon conversion of convertible notes amounted to $382,077.

 

During the year ended October 31, 2015, 759,817,144 shares of common stock were retired and converted to 767 shares of convertible preferred stock.

 

Fiscal year 2016:

 

During the nine months ended July 31, 2016, 692,943,784 shares of common stock were retired and converted to 694 shares of convertible preferred stock and 513 shares of preferred stock were converted to 513,000,000 shares of common stock. In addition, 201,000,000 shares owned by two shareholders were retired and cancelled.

 

In the Company’s quarterly report on Form 10-Q for the six months ended April 30, 2016 (the “April 2016 10-Q”) the Company reported that they issued a total of 194,000,000 shares of common stock upon conversion of 194 shares of preferred stock. In actuality, the Company issued an additional 279,000,000 shares of common stock upon conversion of 279 shares of preferred stock, for a total issuance of 473,000,000 shares of common stock upon conversion of 473 shares of preferred stock during the six months ended April 30, 2016. 279,000,000 shares of common stock issued during this six-month period following conversion of 279 shares of preferred stock were improperly allocated and disclosed as shares issued to consultants for services rendered, which disclosure has been updated as set forth below.

 

 

 

 F-15 

 

 

During the nine months ended July 31, 2016, the Company issued 29,000,000 shares of common stock for consulting services rendered. The shares were valued at $81,600 based on the closing stock prices on the dates of the stock grants. In the Company’s April 2016 10-Q, the Company erroneously reported that they issued 358,000,000 shares of common stock to consultants for services rendered during the six months ended April 30, 2016. As described above, 279,000,000 of these shares of common stock were actually issued upon conversion of 279 shares of preferred stock during the six months ended April 30, 2016 and were improperly allocated as shares issued to consultants for services rendered in the April 2016 10-Q. Further, 50,000,000 shares of common stock previously described in the April 2016 10-Q as shares issued to consultants for services rendered were erroneously issued and have subsequently been cancelled.

 

In July 2016, the Company issued 97,217,391 shares of common stock in consideration of cancellation of $43,000 of accrued and unpaid payables. The Company did not receive any cash proceeds upon these issuances.

 

These issuances were exempt pursuant to Section 4(a)(2) of the Securities Act.

 

Options and Warrants

 

A summary of option activity during the nine months ended July 31, 2016 and the year ended October 31, 2015 are presented below:

 

   July 31, 2016   October 31, 2015 
       Weighted   Weighted       Weighted   Weighted 
       average   average       average   average 
   Number of   exercise   life   Number of   exercise   life 
   shares   price   (years)   shares   price   (years) 
                         
Outstanding at beginning of year   140,666,667   $0.0146    9.27    52,666,667   $0.08    6.24 
Granted               138,000,000    0.0146    10.00 
Exercised                        
Forfeited               50,000,000    0.08    6.24 
Cancelled                        
Expired                        
                               
Outstanding at end of period   140,666,667   $0.0146    8.77    140,666,667   $0.0146    9.27 
                               
Options exercisable at end of period   140,666,667   $0.0146    8.52    140,666,667   $0.0146    9.27 

 

A summary of warrant activity during the nine months ended July 31, 2016 and the year ended October 31, 2015 are presented below:

 

   July 31, 2016   October 31, 2015 
       Weighted   Weighted       Weighted   Weighted 
       average   average       average   average 
       exercise   remaining       exercise   remaining 
   Number   price   contractual   Number   price   contractual 
   Outstanding   per share   life (years)   Outstanding   per share   life (years) 
Outstanding at beginning of year   4,000,000   $0.75    5.39    4,000,000   $0.75    6.39 
Granted                           
Exercised                        
Forfeited                        
Cancelled                        
Expired                        
                               
Outstanding at end of period   4,000,000   $0.75    4.64    4,000,000   $0.75    5.39 
                               
Warrants exercisable at end of period      $           $     

 

 

 

 F-16 

 

 

In November 2014, the Company granted options to all board members to purchase a total of 138,000,000 shares at an exercise price of $0.0146 per share of its common stock for service rendered and to replace the old options. These options vests in 4 equal amounts on the grant date, 2/9/2015, 5/9/2015, and 8/9/2015 and are exercisable within 10 years from the dates of vesting. The total estimated value using the Black-Scholes Model, based on the following variables, was $2,760,000.

 

Market Price: $0.020

Exercise Price: $0.015

Term: 10 years

Volatility: 321%

Dividend Yield: 0

Risk Free Interest Rate: 2.25%

 

For the year ended October 31, 2015, $2,760,000 was fully amortized as stock based compensation.

 

NOTE 9 – SUBSEQUENT EVENTS

 

1.In August 2016, the Company issued 154,260,851 shares of common stock in consideration of cancellation of $41,560 of accrued and unpaid payables. The Company did not receive any cash proceeds upon these issuances. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

2.In August 2016, the Company issued 192,000,000 shares of common stock upon conversion of 192 shares of our convertible preferred stock. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

3.In August 2016, the Company issued 200 shares of our convertible preferred stock as compensation for services. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

4.In August 2016, the Company issued 406 shares of our convertible preferred stock sold during the period ended July 31, 2016. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

5.In September 2016, the Company entered into a consulting agreement with Woodward Global, Ltd. (“WG”), a Nevada corporation owned by Mr. Angus McKay, son of William R. McKay, the Company’s Chairman and CEO. Pursuant to the agreement, the Company will provide consulting services to WG for a period of twelve (12) months for a total consideration of $2,000,000.

 

 

 

 F-17 

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

 

We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our financial statements and accompanying notes included elsewhere in this report.

 

Forward Looking Statements

 

This quarterly report on Form 10-Q 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”). Those forward-looking statements include our expectations, beliefs, intentions and strategies regarding the future. Such forward-looking statements relate to, among other things, Godfrey’s commencement of manufacturing operations; our distribution of Godfrey’s products; our working capital requirements; and the further approvals of regulatory authorities. There are several important factors that could cause our future results to differ materially from our forward-looking statement. Some of these important factors, but not necessarily all important factors, include our ability to acquire additional capital as and when needed; production and/or quality control problems; the denial, suspension or revocation of privileged operating licenses by regulatory authorities; overall industry environment; competitive pressures and general economic conditions; and those other risks discussed more fully in the “Risk Factors” section of in our annual report on Form 10-K for the year ended October 31, 2015 filed with the Securities and Exchange Commission on February 16, 2016. We caution readers not to place undue reliance on any forward-looking statements. We do not undertake, and specifically disclaim any obligation, to update or revise such statements to reflect new circumstances or unanticipated events as they occur, and we urge readers to review and consider disclosures we make in this and other reports that discuss factors germane to our business. See in particular our reports on Forms 10-K, 10-Q and 8-K subsequently filed from time to time with the Securities and Exchange Commission.

 

Overview

 

We are engaged in the business of designing, manufacturing and selling aerospace quality component parts for commercial and military aircraft, space vehicles, power plants and surface and undersea vessels. Our initial products will be self-lubricating spherical bearings for commercial aircraft. These bearings are integral to the operation of commercial aircraft and help with several flight-critical tasks, including aircraft flight controls and landing gear. As of the date of this report, we have not had significant commercial manufacture and sale of our products.

 

In the second quarter of 2013, we agreed to issue 4,800,000 shares of our common stock to three shareholders of our subsidiary, Godfrey (China) Limited (“Godfrey”), in exchange for their transfer to us of a total of 30% of the outstanding capital stock of Godfrey. One of the parties was Harbin Aerospace Company, LLC, our largest shareholder which is controlled by the wife of our chief executive officer, William R. McKay. Harbin transferred to us five percent of the capital stock of Godfrey in exchange for our issuance of 800,000 common shares. Upon the closing of the transactions, we increased our ownership of Godfrey from 25% to 55%.

 

We commenced our aircraft component business in February 1, 2010. To date, our operations have primarily focused on the development of our production facility in China and the design and engineering of our initial product line of spherical bearings. Naval Air Systems Command (“NAVAIR”) of the United States Navy has completed the qualification testing of our initial line of bearings. However, we expect that we will need to raise at least $1 million of capital, or to develop a strategic partnership, through which the partner will contribute working capital, in order to better develop international marketing and production.

 

In December 2015, we received our first purchase order for spherical bearings and such order was manufactured and delivered in March 2016. In addition, in May 2016, we entered into licensing and services agreements for the development and marketing of aerospace products in China, Australia, Asia and Africa.

 

Results of Operations

 

Three Months Ended July 31, 2016 and 2015

 

During the three months ended July 31, 2016, we incurred $440,069 of operating expenses compared to $1,362,112 during the three months ended July 31, 2015. Our operating expenses consist primarily of professional fees, consulting fees, and other general and administrative expenses. The decrease in operating expenses for the three months ended July 31, 2016 compared to the same period in fiscal 2015 was primarily attributable to our significant decrease in stock based compensation to directors and officers during the 2016 period which was offset by the increase in consulting expenses during the period. However, we expect our operating expenses will significantly increase at such time as we commence the distribution of our spherical bearings.

 

 

 

 1 

 

 

During the three months ended July 31, 2016 and 2015, we incurred a net loss from operations of $446,339 and $1,507,292, respectively. The decrease was primarily attributable to the significant decrease in our stock based compensation to directors and officers, interest expense, change in fair value of derivative liabilities and derivative expenses during the 2016 period, which was offset by the increase in consulting expenses during the 2016 period.

 

Our net loss was $446,339 and $1,507,292 for the three months ended July 31, 2016 and 2015, respectively. Our loss attributable to our non-controlling interest in our Godfrey subsidiary for the three months ended July 31, 2016 and 2015 was $41,205 and $41,209, respectively. Accordingly, the net loss attributable to us for the three months ended July 31, 2016 and 2015 was $405,134 and $1,466,083, respectively.

 

Nine Months Ended July 31, 2016 and 2015

 

We received the initial order for our spherical bearings in December 2015. We manufactured and delivered these bearings in March 2016. During the nine months ended July 31, 2016, we recognized sales revenue of $109,140 from the sale of our spherical bearings. Also we incurred $2,598,141 of operating expenses compared to $4,187,916 during the nine months ended July 31, 2015.  Our operating expenses consist primarily of professional fees, consulting fees, and other general and administrative expenses. The decrease in operating expenses for the nine months ended July 31, 2016 compared to the same period in fiscal 2015 was primarily resulted from issuance of options for common stock to board of directors in 2015. We had no such issuance in the nine months ended July 31, 2016. However, we expect our operating expenses will significantly increase at such time as we commence the distribution of our spherical bearings.

 

During the nine months ended July 31, 2016 and 2015, we incurred a net loss from operations of $2,681,864 and $4,582,913, respectively. The decrease primarily resulted from issuance of common stock options to board of directors in 2015. We had no such issuance in the nine months ended July 31, 2016.

 

Our net loss was $2,681,864 and $4,582,913 for the nine months ended July 31, 2016 and 2015, respectively. Our loss attributable to our non-controlling interest in our Godfrey subsidiary for the nine months ended July 31, 2016 and 2015 was $94,807 and $120,390, respectively.

 

Accordingly, the net loss attributable to us for the nine months ended July 31, 2016 and 2015 was $2,587,057, and $4,462,523, respectively.

 

Financial Condition

 

Liquidity and Capital Resources

 

As of July 31, 2016, we had cash of $6,551 and a working capital deficit of $641,488.  At October 31, 2015, we had cash of $6,833 and a working capital deficit of $401,796.

 

Since July 31, 2016, our working capital has decreased as a result of continuing losses from operations. We estimate that we require approximately $1 million of additional working capital over the next 12 months in order to fund our expected marketing and distribution of the initial line of aircraft component products to be manufactured at our Guangzhou facility and to fund our expected operating losses as we endeavor to build revenue and achieve a profitable level of operations. However, there are no commitments or understandings at this time with any third parties for their provision of capital to us.

 

We will endeavor to raise the additional required funds through various financing sources, including the sale of our equity and debt securities and, subject to our commencement of significant revenue producing operations, the procurement of commercial debt financing. However, there can be no guarantees that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to expand or continue our business as desired and operating results may be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced and the new equity securities may have rights, preferences or privileges senior to those of the holders of our common stock.

 

The report of our independent registered public accounting firm for the fiscal year ended October 31, 2015 states that due to our losses from operations and lack of working capital there is substantial doubt about our ability to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, as defined in Item 303 of Regulation S-K.

 

 

 

 2 

 

 

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

 

ITEM 4 – CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. The term “disclosure controls and procedures” refers to the controls and procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.

 

Based upon the above-described evaluation, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were not effective as of July 31, 2016 due to certain material weakness in our internal control over financial reporting. An internal control material weakness is a significant deficiency, or aggregation of deficiencies, that does not reduce to a relatively low level the risk that material misstatements in financial statements will be prevented or detected on a timely basis by employees in the normal course of their work. Our management assessed the effectiveness of our internal control over financial reporting as of July 31, 2016, and this assessment identified the following material weaknesses in our internal control over financial reporting:

 

1.Due to our small size, we do not maintain effective internal controls to assure segregation of duties as we have only one employee who is responsible for initiating and approving of transactions, thereby creating the segregation of duties weakness;

 

2.Our board of directors does not have an audit committee or a financial expert to maintain effective oversight of our financial reporting process; and

 

3.Lack of formal policies or procedures to provide assurance that relevant information is identified, captured, processed, and reported in an appropriate and timely fashion.

 

Based on that evaluation, management concluded that our internal control over financial reporting was not effective as of July 31, 2016.

 

Changes in internal control over financial reporting

 

As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended July 31, 2016, that materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

 

 

 

 3 

 

 

PART II: OTHER INFORMATION

 

ITEM 1 – LEGAL PROCEEDINGS

 

None.

 

ITEM 1A – RISK FACTORS

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

 

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

1.During the quarterly period ended July 31, 2016, we issued 40,000,000 shares of our common stock upon conversion of 40 shares of our preferred stock. During the nine months ended July 31, 2016, we issued 513,000,000 shares of our common stock upon conversion of 513 shares of our preferred stock. In our quarterly report on Form 10-Q for the six months ended April 30, 2016 (the “April 2016 10-Q”) we reported that we issued a total of 194,000,000 shares of our common stock upon conversion of 194 shares of our preferred stock. In actuality, we issued an additional 279,000,000 shares of our common stock upon conversion of 279 shares of our preferred stock, for a total issuance of 473,000,000 shares of our common stock upon conversion of 473 shares of our preferred stock during the six months ended April 30, 2016. 279,000,000 shares of our common stock issued during this six-month period following conversion of 279 shares of our preferred stock were improperly allocated and disclosed as shares issued to consultants for services rendered, which disclosure has been updated as set forth below. The issuances were exempt in reliance upon the exemption provided by Rule 3(a)(9) and/or Section 4(a)(2) of the Securities Act.

 

2.During the nine months ended July 31, 2016, we issued 29,000,000 shares of common stock to consultants in consideration of services rendered. The shares were valued at $81,600 based on the closing stock prices on the dates of the stock grants. In our April 2016 10-Q we erroneously reported that we issued 358,000,000 shares of our common stock to consultants for services rendered during the six months ended April 30, 2016. As described above, 279,000,000 of these shares of our common stock were actually issued upon conversion of 279 shares of our preferred stock during the six months ended April 30, 2016 and were improperly allocated as shares issued to consultants for services rendered in the April 2016 10-Q. Further, 50,000,000 shares of our common stock previously described in our April 2016 10-Q as shares issued to consultants for services rendered were erroneously issued and have subsequently been cancelled. The issuances were exempt pursuant to Section 4(a)(2) of the Securities Act.

 

3.During the quarterly period ended July 31, 2016, we sold 354 shares of our preferred stock in consideration of $191,500, the proceeds of which will be used for general corporate purposes. In August 2016, we issued 406 shares of our convertible preferred stock sold during the nine months ended July 31, 2016. 3 shares of our preferred stock that were sold during the nine months ended July 31, 2016 have not been issued and were recorded as preferred stock to be issued. The issuances were exempt pursuant to Section 4(a)(2) of the Securities Act.

 

4.During quarterly period ended July 31, 2016, we issued 340 shares of convertible preferred stock to our employees and consultants in consideration of services rendered. These shares were valued at $1,309,998 based on the closing prices of the underlying common stock. We did not receive any cash proceeds for these issuances. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

5.In July 2016, we issued 97,217,391 shares of our common stock in consideration of cancellation of $43,000 of accrued and unpaid payables. We did not receive any cash proceeds upon these issuances. The issuances were exempt pursuant to Section 4(a)(2) of the Securities Act.

 

6.In August 2016, we issued 154,260,851 shares of common stock in consideration of cancellation of $41,560 of accrued and unpaid payables. We did not receive any cash proceeds upon these issuances. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

7.In August 2016, we issued 192,000,000 shares of common stock upon conversion of 192 shares of our convertible preferred stock. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

8.In August 2016, we issued 200 shares of our convertible preferred stock as compensation for services. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

 

 

 

 4 

 

 

ITEM 3 – DEFAULT UPON SENIOR SECURITIES

 

None.

 

ITEM 4 – MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5 – OTHER INFORMATION

 

On July 6, 2016, Kevin Gould resigned as secretary and as a director. Mr. Gould’s resignation was for personal reasons and was not because of any disagreements with Trans-Pacific Aerospace Company, Inc. on matters relating to its operations, policies and practices.

 

In September 2016, we entered into a consulting agreement (“Consulitng Agreement”) with Woodward Global, Ltd. (“WG”), a Nevada corporation owned by Mr. Angus McKay, son of William R. McKay, our Chairman and CEO. Pursuant to the Consulting Agreement, we will provide consulting services to WG for a period of twelve (12) months for a total consideration of $2,000,000.

 

ITEM 6 - EXHIBITS

 

Item No.

Description
31.1   Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.  
       
32.1   Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.  
       
101.INS   XBRL Instance Document  
101.SCH   XBRL Taxonomy Schema Linkbase Document  
101.CAL   XBRL Taxonomy Calculation Linkbase Document  
101.DEF   XBRL Taxonomy Definition Linkbase Document  
101.LAB   XBRL Taxonomy Labels Linkbase Document  
101.PRE   XBRL Taxonomy Presentation Linkbase Document  
           

 

 

 

 

 5 

 

 

SIGNATURES

 

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

 

   

TRANS-PACIFIC AEROSPACE COMPANY, INC.

(Registrant)

     
Dated: September 19, 2016 By: /s/ William Reed McKay
      William Reed McKay
      President, Chief Executive Officer, Chief Financial Officer and Director (Principal Executive and Financial and Accounting Officer)
       

 

 

 

 

 

 

 

 

 

 

 6 

EX-31.1 2 tpac_10q-ex3101.htm CERTIFICATION

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, William Reed McKay, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Trans-Pacific Aerospace Company, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: September 19, 2016

   
/s/ William Reed McKay  
William Reed McKay  

President, Chief Executive Officer, Chief Financial Officer and Director

(Principal Executive and Financial and Accounting Officer)

 

 

 

 

   

 

EX-32.1 3 tpac_10q-ex3201.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, William Reed McKay, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Trans-Pacific Aerospace Company, Inc. on Form 10-Q for the period ended July 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Trans-Pacific Aerospace, Inc.

 

Date: September 19, 2016

     
  By: /s/ William Reed McKay
  Name: William Reed McKay
  Title: President, Chief Executive Officer, Chief Financial Officer and Director (Principal Executive and Financial and Accounting Officer)

 

 

 

   

 

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Document and Entity Information - shares
9 Months Ended
Jul. 31, 2016
Sep. 07, 2016
Document And Entity Information    
Entity Registrant Name Trans-Pacific Aerospace Company, Inc.  
Entity Central Index Key 0001422295  
Document Type 10-Q  
Document Period End Date Jul. 31, 2016  
Amendment Flag false  
Current Fiscal Year End Date --10-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   3,920,880,936
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2016  
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Consolidated Balance Sheets (Unaudited) - USD ($)
Jul. 31, 2016
Oct. 31, 2015
Current assets    
Cash $ 6,551 $ 6,833
Accounts receivable 109,140 0
Prepaid expenses 0 1,584
Total current assets 115,691 8,417
Non-Current assets    
Office equipment, net of accumulated depreciation of $5,605 and $4,702, respectively 2,801 3,704
Security deposit 1,584 1,584
Total non-current assets 4,385 5,288
Total assets 120,076 13,705
Current liabilities    
Accounts payable and accrued expenses 210,022 60,021
Income taxes payable 1,951 1,951
Accrued salary and payroll taxes 20,433 20,433
Accrued interest payable 0 500
Other payables - related parties 264,773 58,975
Convertible note payable, net of discount 0 8,333
Convertible note payable, currently in default 260,000 260,000
Derivative liabilities - conversion option 0 0
Total current liabilities 757,179 410,213
Total liabilities 757,179 410,213
Stockholders' (deficit)    
Preferred stock, par value $0.001, 5,000,000 shares authorized 4,007 and 2,945 shares issued and outstanding at July 31, 2016 and October 31, 2015, respectively 4 3
Common stock, par value $0.001, 4,500,000,000 shares authorized 3,574,620,085 and 3,829,346,478 shares issued and outstanding at July 31, 2016 and October 31, 2015, respectively 3,574,620 3,829,346
Additional paid-in capital $ 19,624,742 $ 17,142,748
Preferred stock to be issued 236,000 0
Common stock to be issued $ 64,093 $ 86,093
Accumulated deficit (23,402,037) (20,814,980)
Total Trans-Pacific Aerospace Company Inc. stockholders' equity 97,422 243,210
Non-controlling interest in subsidiary (734,525) (639,718)
Total stockholders' (deficit) (637,103) (396,508)
Total liabilities and stockholders' (deficit) $ 120,076 $ 13,705
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Consolidated Balance Sheets (Parenthetical) - USD ($)
Jul. 31, 2016
Oct. 31, 2015
Statement of Financial Position [Abstract]    
Accumulated depreciation $ 5,605 $ 4,702
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 4,007 2,945
Preferred stock, shares outstanding 4,007 2,945
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 4,500,000,000 4,500,000,000
Common stock, shares issued 3,574,620,085 3,829,346,478
Common stock, shares outstanding 3,574,620,085 3,829,346,478
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Unaudited Consolidated Statements of Operations - USD ($)
3 Months Ended 9 Months Ended
Jul. 31, 2016
Jul. 31, 2015
Jul. 31, 2016
Jul. 31, 2015
Income Statement [Abstract]        
Sales $ 0 $ 0 $ 109,140 $ 0
Cost of sales 0 0 0 0
Gross profit 0 0 109,140 0
Operating expenses        
Professional fees 7,220 24,385 30,335 100,895
Consulting 269,400 74,500 2,337,000 173,500
Other general and administrative 163,449 1,263,227 339,946 3,913,521
Total operating expenses 440,069 1,362,112 2,707,281 4,187,916
Operating loss from continuing operations (440,069) (1,362,112) (2,598,141) (4,187,916)
Interest expense, net (6,270) (138,704) (83,723) (333,460)
Change in fair value of derivative liabilities 0 (6,476) 0 424,822
Derivative expenses 0 0 0 (486,359)
Net loss from continuing operations (446,339) (1,507,292) (2,681,864) (4,582,913)
Discontinued operations        
Net gain (loss) from discontinued operations 0 0 0 0
Loss before income taxes (446,339) (1,507,292) (2,681,864) (4,582,913)
Income taxes 0 0 0 0
Net Loss (446,339) (1,507,292) (2,681,864) (4,582,913)
Less: Loss attributable to non-controlling interest (41,205) (41,209) (94,807) (120,390)
Net Loss attributable to the Company $ (405,134) $ (1,466,083) $ (2,587,057) $ (4,462,523)
Basic and dilutive net loss from operations per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
Weighted average number of common shares outstanding, basic and diluted 3,462,184,357 3,274,015,518 3,356,733,681 1,372,910,658
XML 14 R5.htm IDEA: XBRL DOCUMENT v3.5.0.2
Consolidated Statement of Stockholders' Equity (Deficit) - USD ($)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Common Stock To Be Issued [Member]
Preferred Stock To Be Issued
Noncontrolling Interest [Member]
Accumulated Deficit [Member]
Total
Beginning balance, shares at Oct. 31, 2014 0 179,447,431            
Beginning balance, value at Oct. 31, 2014 $ 0 $ 179,447 $ 15,461,785 $ 64,093 $ 0 $ (489,407) $ (16,064,350) $ (848,432)
Common stock converted to preferred stock, shares converted   (759,817,144)            
Common stock converted to preferred stock, value of stock converted   $ (759,817) 759,817          
Common stock converted to preferred stock, preferred shares issued 767              
Common stock converted to preferred stock, value of preferred shares issued $ 1             1
Preferred stock issued for services & compensation, shares 1,203              
Preferred stock issued for services & compensation, value $ 1   644,999         645,000
Common stock issued for cash, shares   228,000,000            
Common stock issued for cash, value   $ 228,000 (18,000)         210,000
Preferred stock issued for cash, shares 250              
Preferred stock issued for cash, value     300,000 22,000       322,000
Stocks issued in lieu of finders fees, shares 725 57,019,761            
Stocks issued in lieu of finders fees $ 1 $ 57,020 (57,021)          
Stock issued for services and compensation, shares   387,000,000            
Stock issued for services and compensation   $ 387,000 38,000         425,000
Common stock issued upon conversion of notes payable, shares   3,737,696,430            
Common stock issued upon conversion of notes payable   $ 3,737,696 (3,355,618)         382,078
Conversion of derivative liability to common stock     540,586         540,586
Amortization of stock options     2,760,000         2,760,000
Imputed interest     18,200         18,200
Note discount     50,000         50,000
Loss on Minority interest           (150,311)   (150,311)
Net loss             (4,750,630) (4,750,630)
Ending balance, shares at Oct. 31, 2015 2,945 3,829,346,478            
Ending balance, value at Oct. 31, 2015 $ 3 $ 3,829,346 17,142,748 86,093   (639,718) (20,814,980) (396,508)
Common stock converted to preferred stock, shares converted   (692,943,784)            
Common stock converted to preferred stock, value of stock converted   $ (692,944)            
Common stock converted to preferred stock, preferred shares issued 694              
Common stock converted to preferred stock, value of preferred shares issued $ 1              
Preferred stock converted to common stock, preferred shares converted (513)              
Preferred stock converted to common stock, preferred shares converted value $ (1)              
Preferred stock converted to common stock, common stock issued   513,000,000            
Preferred stock converted to common stock, common stock issued value   $ 513,000 (513,000)         (1)
Preferred stock issued for services & compensation, shares 664              
Preferred stock issued for services & compensation, value $ 1   2,062,798         2,062,799
Preferred stock issued for cash, shares 225              
Preferred stock issued for cash, value     24,200 (22,000) 236,000     238,500
Stock issued for services and compensation, shares   29,000,000            
Stock issued for services and compensation   $ 29,000 52,000         81,600
Common stock, shares retired   (201,000,000)            
Common stock retired, value   $ (201,000) 201,000          
Preferred stock retired and cancelled, shares (8)              
Common stock issued upon conversion of other payables, shares issued   97,217,391            
Common stock issued upon conversion of other payables, value   $ 97,218 (52,497)         44,721
Conversion of derivative liability to common stock               0
Imputed interest     13,650         13,650
Loss on Minority interest           (94,807)   (94,807)
Net loss             (2,587,057) (2,587,057)
Ending balance, shares at Jul. 31, 2016 4,007 3,574,620,085            
Ending balance, value at Jul. 31, 2016 $ 4 $ 3,574,620 $ 19,624,742 $ 64,093 $ 236,000 $ (734,525) $ (23,402,037) $ (637,103)
XML 15 R6.htm IDEA: XBRL DOCUMENT v3.5.0.2
Unaudited Consolidated Statements of Cash Flows - USD ($)
9 Months Ended
Jul. 31, 2016
Jul. 31, 2015
Cash flows from operating activities:    
Net loss $ (2,681,864) $ (4,582,913)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock based compensation 2,144,398 3,607,500
Amortization of debt discount 41,667 289,976
Imputed interest expense 13,650 13,650
Change in fair value of derivative liabilities 0 (424,822)
Derivative expense 0 486,359
Interest converted to common stock 1,720 15,179
Interest paid by shareholder 27,186 0
Depreciation expense 903 903
Change in operating assets and liabilities:    
Accounts receivable (109,140) 0
Prepaid and deferred expenses 1,584 (2,376)
Accounts payable and accrued expenses 150,001 2,236
Accrued interest payable (500) (3,722)
Net cash used in operating activities (410,395) (598,030)
Cash flows from financing activities:    
Common stock issued for cash 0 510,000
Preferred stock sold for cash 238,500 22,000
Convertible note issued for cash 0 160,500
Repayment of convertible notes 0 (48,000)
Other payables - related parties 171,613 (725)
Net cash provided by financing activities 410,113 643,775
Net increase / decrease in cash (282) 45,745
Cash, beginning of the period 6,833 50,089
Cash, end of the period 6,551 95,834
Supplemental cash flow disclosure:    
Interest paid 0 0
Income taxes paid 0 0
Supplemental disclosure of non-cash transactions:    
Common stock issued for payment on outstanding liabilities 44,720 49,892
Common stock issued for conversion on notes payable 0 382,077
Conversion of derivative liability to common stock 0 511,339
Retirement of common shares 201,000 0
Note and interest paid by shareholder 77,186 0
Derivative liabilities $ 0 $ 23,089
XML 16 R7.htm IDEA: XBRL DOCUMENT v3.5.0.2
1. BACKGROUND AND ORGANIZATION
9 Months Ended
Jul. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
BACKGROUND AND ORGANIZATION

Organization

 

The Company was incorporated in the State of Nevada on June 5, 2007, as Gas Salvage Corp. for the purpose of engaging in the exploration and development of oil and gas. In July 2008, the Company changed its name to Pinnacle Energy Corp. On February 1, 2010, the Company completed the acquisition of the aircraft component part design, engineering and manufacturing assets of Harbin Aerospace Company, LLC (“HAC”). The transaction was structured as a business combination. Following completion of the HAC acquisition, the Company’s Board of Directors decided to dispose of the oil and gas business interests and focus on the aircraft component market. On February 10, 2010, the Company completed the sale of all of its oil and gas business interests in exchange for cancellation of all obligations under an outstanding promissory note having a principal amount of $1,000,000. Pursuant to Financial Accounting Standards Board (FASB) standards, the Company has retro-actively presented its oil and gas business as discontinued operations.

 

In March 2010, the Company changed its name to Trans-Pacific Aerospace Company, Inc.

 

On July 27, 2008, the Company completed a three-for-one stock split of the Company’s common stock. The share and per-share information disclosed within this Form 10-Q reflect the completion of this stock split.

 

On April 5, 2013, the Company entered into Securities Purchase Agreements to purchase additional capital stock of Godfrey (China) Limited (“Godfrey”), the Company’s 25%-owned Hong Kong subsidiary engaged in the development of the production facility in Guangzhou, China. On June 21, 2013, upon closing of the transactions under the Securities Purchase Agreements, the Company increased its ownership of Godfrey from 25% to 55%.

 

Business Overview

 

The Company’s aircraft component business commenced on February 1, 2010. To date, its operations have focused on product design and engineering. The Company has recently commenced commercial manufacture or sales of its products.

 

The Company designs, manufactures and sells aerospace quality component parts for commercial and military aircraft, space vehicles, power plants and surface and undersea vessels. These parts have applications in both newly constructed platforms and as spares for existing platforms. The Company’s initial products are self-lubricating spherical bearings that help with several flight-critical tasks, including aircraft flight controls and landing gear.

 

Going Concern

 

The Company's financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America, and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company incurred a net loss from operations of $2,681,864 during the nine months ended July 31, 2016, and an accumulated deficit of $23,402,037 at July 31, 2016. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.

 

Management’s plans to continue as a going concern include raising additional capital through sales of common stock and/or a debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The Company anticipates that losses will continue until such time, if ever, that the Company is able to generate sufficient revenues to support its 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.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Jul. 31, 2016
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

 

The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S.) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and reflect all adjustments, consisting of normal recurring adjustments and other adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company, for the respective periods presented. The results of operations for an interim period are not necessarily indicative of the results that may be expected for any other interim period or the year as a whole. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended October 31, 2015, filed with the SEC on February 16, 2016.

 

Consolidation

 

Accounting policies used by the Company and the Company’s subsidiaries conform to US GAAP. Significant policies are discussed below. The Company’s consolidated accounts include the Company’s accounts and the accounts of the Company’s subsidiaries of which we own a 50% interest or greater.

 

These consolidated financial statements include the accounts of the parent company Trans-Pacific Aerospace Company, Inc., and the majority owned subsidiary: Godfrey. All intercompany transactions have been eliminated.

 

Non-controlling interests

 

The Company accounts for changes in our controlling interests of subsidiaries according to Accounting Codification Standards 810 – Consolidations (“ASC 810”). ASC 810 requires that the Company record such changes as equity transactions, recording no gain or loss on such a sale.

 

The Company’s non-controlling interest arises from the purchase of equity in Godfrey. It represents the portion of Godfrey that is not owned. ASC 810 requires that the Company account for the equity and income or loss on that operation separately from the Company’s other activities. In the equity section of the Consolidated Balance Sheet, the Company presents the portion of the negative equity attributable to non-controlling interests in Godfrey. In the Consolidated Statement of Operations, the Company presents the portion of current period net loss in Godfrey attributable to non-controlling interests.

 

Use of Estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at July 31, 2016 and October 31, 2015.

 

Concentration of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.

 

Impairment of Long-Lived Assets

 

The Company has adopted FASB Accounting Standards Codification (ASC) 360-10, Property, Plant and Equipment FASB ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

 

Indefinite-lived Intangible Assets

 

The Company has an indefinite-lived intangible asset (goodwill) relating to purchased blueprints, formulas, designs and processes for manufacturing and production of self-lubricated spherical bearings, bushings and rod-end bearings. The indefinite-lived intangible asset is not amortized; rather, it is tested for impairment at least annually by comparing the carrying amount of the asset with the fair value. An impairment loss is recognized if the carrying amount is greater than fair value.

 

Fair Value of Financial Instruments

 

The Company adopted FASB ASC 820 on October 1, 2008. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has various financial instruments that must be measured under the new fair value standard including: cash and debt. The Company currently does not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

Cash, accounts payable, other payables, and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.

 

The following tables provide a summary of the fair values of assets and liabilities:

 

       Fair Value Measurements at 
       July 31, 2016 
    Carrying Value July 31, 2016    Level 1    Level 2     Level 3  
Liabilities:                    
Convertible notes payable – currently in default  $260,000   $   $   $260,000 

 

       Fair Value Measurements at 
       October 31, 2015 
    Carrying Value October 31, 2015    Level 1    Level 2     Level 3  
Liabilities:                    
Convertible notes payable, net  $8,333   $   $   $8,333 
Convertible notes payable – currently in default  $260,000   $   $   $260,000 

 

The Company believes that the market rate of interest as of July 31, 2016 and October 31, 2015 was not materially different to the rate of interest at which the convertible notes payable were issued. Accordingly, the Company believes that the fair value of the convertible notes payable approximated their carrying value at July 31, 2016 and October 31, 2015 due to short term maturity.

 

Revenue Recognition

 

We received the initial order for our spherical bearings in December 2015. We manufactured and delivered these bearings in March 2016. The Company recognizes revenue on sales of products when the goods are delivered and title to the goods passes to the customer provided that: (i) there are no uncertainties regarding customer acceptance; (ii) persuasive evidence of an arrangement exists; (iii) the sales price is fixed and determinable; and (iv) collectability is reasonably assured.

 

Income Taxes

 

The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.

 

The accounting guidance for uncertainties in income tax prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company recognizes a tax benefit from an uncertain tax position in the consolidated financial statements only when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority’s widely understood administrative practices and precedents.

 

Equipment

 

Equipment is recorded at cost and depreciated using straight line methods over the estimated useful lives of the related assets. The Company reviews the carrying value of long-term assets to be held and used when events and circumstances warrant such a review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. The cost of normal maintenance and repairs is charged to operations as incurred. Major overhaul that extends the useful life of existing assets is capitalized. When equipment is retired or disposed, the costs and related accumulated depreciation are eliminated and the resulting profit or loss is recognized in income. As of July 31, 2016, the useful lives of the office equipment ranged from five years to seven years.

 

Issuance of Shares for Non-Cash Consideration to Non-Employees

 

The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services received or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. 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.

 

Stock-Based Compensation

 

Stock-based compensation cost to employees is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC 718. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit.

 

Net Loss Per Share

 

The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised. There were convertible notes, 4,007 shares of convertible preferred stock, 2,000,000 Series A Warrants, 2,000,000 Series B Warrants and options for 140,666,667 shares outstanding as of July 31, 2016 that are not included in the calculation of Diluted EPS as their impact would be anti-dilutive.

 

   For the Nine Months Ended
July 31,
 
   2016   2015 
         
Net loss attributable to the Company  $(2,587,057)  $(4,462,523)
           
Basic and diluted net loss from operations per share  $(0.00)  $(0.00)
           
Weighted average number of common shares outstanding,
basic and diluted
   3,356,733,681    1,372,910,658 

 

 

Recently Adopted and Recently Enacted Accounting Pronouncements

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders' equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 during the quarter ended May 31, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

 

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.

 

In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).

 

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

 

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

 

  a. Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)
     
  b. Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
     
  c. Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

 

  a. Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern
     
  b. Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
     
  c. Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

 

In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.

 

In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this Update defer the effective date of ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

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3. ACCOUNTS RECEIVABLE
9 Months Ended
Jul. 31, 2016
Receivables [Abstract]  
Accounts Receivable

All accounts receivable are due 90 days from the date billed based on the Company’s collection policy and agreed by the customer. As of July 31, 2016 and October 31, 2015, the Company had accounts receivable balance of $109,140 and $0, respectively.

 

In May 2016, the Company entered into a Service Level Agreement with a Hong Kong entity pursuant to which it agreed to assist such Hong Kong entity to develop a market for medical, aerospace and other machined products in China and elsewhere. The Company will assist such entity with the manufacture of these products to service these markets. The Company agreed to grant such entity a license to market these products under the TPAC name. This agreement has a term of 10 years and be automatically renewable in annual periods unless terminated earlier. The Company shall be paid $1 million annually for time actually spent performing its duties under this Agreement. Further, the Hong Kong entity agreed to purchase from the Company all raw materials, tooling, machinery and equipment, blueprints, engineering, marketing, operations and management and all other services and supplies. The Company agreed not to solicit any employee or consultant of the Hong Kong entity for a period of 3 years following termination of the Agreement.

 

In May 2016, the Company entered into a Licensing and Consulting Services Agreement with an Australian entity pursuant to which it agreed to assist such Australian entity to develop a market for aerospace bearings in Australia, Southern Asia (except China), Asia and Africa. The Company will assist such entity with the manufacture of these products to service these markets. The Company agreed to grant such entity a license to market these products under the name of TPAC Australia. This agreement has a term of 1 year and be automatically renewable in annual periods unless terminated earlier. The Company shall be paid $1 million annually for time actually spent performing its duties under this Agreement. The Company agreed not to solicit any employee or consultant of the Australian entity for a period of 3 years following termination of the Agreement.

 

The Company will recognize the licensing income from these agreements upon receipt of payments.

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4. PROPERTY AND EQUIPMENT
9 Months Ended
Jul. 31, 2016
Property, Plant and Equipment [Abstract]  
Property & Equipment

As of July 31, 2016 and October 31, 2015, the Company had office equipment of $2,801 and 3,704, net of accumulated depreciation of $5,605 and $4,702, respectively. For the nine months ended July 31, 2016 and 2015, the Company recorded depreciation expenses of $903 and $903, respectively.

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5. RELATED PARTY TRANSACTIONS
9 Months Ended
Jul. 31, 2016
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

Due to lack of sufficient funding to maintain the Company’s operations, the Company’s officers and directors loaned money to the Company for short term cash flow needs. As of July 31, 2016 and October 31, 2015, Mr. Peter Liu had payables due to him from Godfrey of $60,000 and $60,000; respectively; The Company had receivables due from HAC amounted to $938 and $1,025 at July 31, 2016 and October 31, 2015, respectively.

 

During the nine months ended July 31, 2016, the Company borrowed $171,525 from various shareholders under oral agreements. This amount bears no interest and is due on demand. In addition, a shareholder made repayment of $77,186 on behalf of the Company to pay off the Apollo Note as described in Note 6 below. The amount is recorded under related party payable and the amount bears no interest and is due on demand. In July 2016, $43,000 of the principal amount was converted to 97,217,391 shares of the Company’s common stock. As of July 31, 2016, the outstanding balance was $205,711.

 

As of July 31, 2016 and October 31, 2015, the total outstanding amount due to related parties was $264,773 and $58,975, respectively.

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6. CONVERTIBLE NOTES PAYABLE
9 Months Ended
Jul. 31, 2016
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

As part of the acquisition of HAC, the Company assumed $260,000 of obligations under a convertible note. The convertible note assumed by the Company does not bear interest and became payable on March 12, 2011. The note is convertible into shares of the Company’s common stock at an initial conversion price of $0.25 per share. The conversion price is subject to adjustment for stock splits and combinations; certain dividends and distributions; reclassification, exchange or substitution; reorganization, merger, consolidation or sales of assets. As the convertible note does not bear interest, the Company recorded the present value of the convertible note obligation at $239,667 and accordingly recorded a convertible note payable for $260,000 and a corresponding debt discount of $20,333. Under the effective interest method, the Company accretes the note obligation to the face amount of the convertible note over the remaining term of the note. The discount was fully amortized at March 12, 2011. Debt discount expense totaled $7,452 and $12,880 for the years ended October 31, 2011 and 2010 respectively. The Company performed an evaluation and determined that the anti-dilution clause did not require derivative treatment. On September 16, 2011, the Company entered into an agreement with the note holder to extend the maturity date of the note. Pursuant to the agreement, the entire outstanding amount became fully due and payable on December 31, 2011. The note is now currently in default. For the nine months ended July 31, 2016 and 2015, the Company recorded imputed interest of $13,650 and $13,650, respectively.

 

During the year ended October 31, 2014, we entered into Securities Purchase Agreements with various accredited and sophisticated investors, pursuant to which we sold Convertible Promissory Notes with interest rates ranging from 8% to 12%, in the original principal amount of $325,000 (the “Notes”). The Notes have maturity date of six months or one year from the issuance date and are convertible into our common stock, at any time after 180 days, at a price for each share of common stock equal to 50% to 60 % of the lowest closing bid price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on formulas specified in the agreements.

 

The issuances of the Notes were exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Rule 506 of Regulation D promulgated thereunder. The purchasers were accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the Notes for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Notes issued. During the year ended October 31, 2014, the Company repaid $112,500 of the principal amount of the Notes.

 

During the six months ended April 30, 2015, six of the above convertible notes with total principal amount of $212,500 reached the 180 days and the conversion options became derivative liabilities. Using the Black-Scholes Model, the Company calculated the fair value of the conversion options and recorded derivative liabilities on the 180 day and April 30, 2015. The change in fair value was recorded as derivative expenses.

 

On June 13, 2014, we entered into Securities Purchase Agreements with Tangiers Investment Group LLC, pursuant to which we sold a 10% Convertible Promissory Note, in the original principal amount of $55,000 (the “Tangiers Note”). The Tangiers Note has a maturity date of June 13, 2015 and is convertible into our common stock, at any time at a price for each share of common stock equal to 60 % of the lowest closing bid price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreement.

 

On November 25, 2014, we entered into Securities Purchase Agreements with Tangiers Investment Group LLC, pursuant to which we sold a 10% Convertible Promissory Note, in the original principal amount of $27,500 (the “Tangiers Note 2”). The Tangiers Note 2 has a maturity date of November 25, 2015 and is convertible into our common stock, at any time at a price for each share of common stock equal to 60% of the lowest closing bid price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreement.

 

The issuance of the Tangiers Note 2 was exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the Tangiers Notes for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Tangiers Notes issued. The Company then calculated the fair value of the conversion option and recorded derivative liability on the issuance date and the subsequent period end dates.

 

On November 10, 2014, we entered into Securities Purchase Agreements with Auctus Private Equity Funds, LLC, pursuant to which we sold an 8% Convertible Promissory Note, in the original principal amount of $40,000 (the “Auctus Note”). The Auctus Note has a maturity date of November 10, 2015 and is convertible into our common stock, at any time at a price for each share of common stock equal to 55 % of the average of the lowest three (3) trading prices of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreement.

 

The issuance of the Auctus Note was exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the Auctus Note for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Auctus Note issued. The Company then calculated the fair value of the conversion option and recorded derivative liability on the issuance date and the subsequent period end dates.

 

On February 23, 2015, we entered into Securities Purchase Agreements with KBM Worldwide, Inc., pursuant to which we sold an 8% Convertible Promissory Note, in the original principal amount of $48,000 (the “KBM Note”). The KBM Note has a maturity date of October 9, 2015 and is convertible into our common stock, at any time after 180 days, at a price for each share of common stock equal to 55 % of the average of the lowest three (3) trading prices during the ten trading days prior to the conversion date of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreement.

 

The issuance of the KBM Note was exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the KBM Note for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Notes issued.

 

In March and April 2015, we entered into Securities Purchase Agreements with various accredited and sophisticated investors, pursuant to which we sold 8% Convertible Promissory Notes, in the original principal amount of $45,000 (the “New Note”). The New Notes have maturity dates of June 12 and October 24, 2015 and are convertible into our common stock, at any time at a price for each share of common stock equal to 55 % or 60% of the lowest closing price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreements.

 

The issuances of the New Notes were exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchasers were accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the New Notes for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the New Notes issued. The Company then calculated the fair value of the conversion option and recorded derivative liability on the issuance date and the subsequent period end dates.

 

In September 2015, the Company entered into a Securities Purchase Agreement with Apollo Capital Corp, pursuant to which we sold a 12% Convertible Promissory Note, in the original principal amount of $50,000 (the “Apollo Note”). The Apollo Note has maturity date of March 29, 2016 and are convertible into our common stock, at any time after 180 days, at a price for each share of common stock equal to 40% of the lowest closing price of the common stock as reported on the National Quotation Bureau OTCQB exchange, based on a formula specified in the agreements.

 

The issuance of the Apollo Note was exempt from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

The Company analyzed the conversion option of the Apollo Note for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liability once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options for the Notes issued. On February 12, 2016, a shareholder made repayment of $77,186 on behalf of the Company to pay off the Apollo Note.

 

During the years ended October 31, 2015, $382,077 of the convertible notes was converted to 3,737,696,430 shares of the Company’s common stock.

 

For the nine months ended July 31, 2016 and 2015, the Company recorded derivative expense of $0 and $55,062, respectively. As of July 31, 2016 and October 31, 2015, the derivative liability was fully converted or paid off.

 

As of July 31, 2016 and October 31, 2015, the outstanding amount of the convertible notes were $0 and $8,333, net of discount of $0 and $41,667, respectively.

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7. COMMITMENTS AND CONTINGENCIES
9 Months Ended
Jul. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

Consulting Agreements

 

The Company has entered into consulting agreements for services to be provided to the Company in the ordinary course of business. These agreements call for expense reimbursement and various payments upon performance of services.

 

On February 1, 2016, the Company entered into a consulting service agreement with Mr. Nicholas Nguyen for a period of 24 months. Upon execution of this agreement, the Company shall issue total of 100 shares of its convertible preferred stock as compensation for Mr. Nguyen’s services. As of July 31, 2016, the shares had not been issued and the Company recorded accrued expense of $150,000.

 

On February 22, 2016, the Company entered into an agreement with Ms. Lixin Chen to perform marketing and operation consulting services for the year ended December 31, 2016. Upon execution of this agreement, the Company shall issue total of 300 shares of its convertible preferred stock as compensation for Ms. Chen’s services. The Company issued the shares in May and recorded $1,260,000 as consulting fee for nine months ended July 31, 2016.

 

Employment Agreements

 

On February 1, 2010, the Company entered into an Employment Agreement with William McKay. Under the agreement, Mr. McKay will receive a base salary of $180,000, plus an initial bonus of 1,200,000 shares of the Company’s common stock (to be issued in 300,000 share blocks on a quarterly basis). The shares were valued based on the closing stock price on the date of the agreement. The initial term of the Employment Agreement expired on January 31, 2011 and automatically renewed for an additional one-year term. The agreement ended January 31, 2013 and Mr. McKay agreed to continue serve as the Company’s CEO without base salary. As of July 31, 2016 and October 31, 2015, the total accrued salaries owed to Mr. McKay were $0.

 

Lease Agreement

 

In October 2010, the Company entered into a lease of its administrative offices. The lease expired November 30, 2012 and currently calls for monthly rental payments of $970 pursuant to a month to month agreement.

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8. CAPITAL STOCK TRANSACTIONS
9 Months Ended
Jul. 31, 2016
Equity [Abstract]  
CAPITAL STOCK TRANSACTIONS

Preferred Stock

 

The Company is authorized to issue up to 5,000,000 shares of its $0.001 preferred stock.

 

In June 2015, the Company designated 20,000 of the authorized preferred stock as convertible preferred stock with the following characteristics:

 

       i.          Each share of Preferred Stock would be convertible into 1,000,000 shares of Common Stock at the Preferred Stock holders’ option, subject to restrictions regarding timing, volume and common share availability.

 

      ii.          In shareholder votes, each share of Preferred Stock would have voting power equal to 1,000,000 shares of Common Stock.

 

During the year ended October 31, 2015, 759,817,144 shares of common stock were retired and converted to 767 shares of convertible preferred stock. In addition, the Company issued 1,203 shares of convertible preferred stock to its employee and consultants for services rendered. These shares were value at $645,000 based on closing price of the underlying common stock if converted.

 

In June 2015, the company entered into various purchase agreements with accredited investors for the sale of 220 shares of its convertible preferred stock at a price of $100 per share. Total cash proceeds from the sale of stock were $22,000 which was recorded as stock to be issued.

 

During the year ended October 31, 2015, the company entered into various purchase agreements with an accredited investor for the sale of 478,000,000 shares of its common stock at a price ranged from $0.00035 to $0.0012 per share. Total cash proceeds from the sale of stock during the year ended October 31, 2015, was $510,000. As of October 31, 2015, the Company issued 228,000,000 shares of common stock and 250 shares of preferred stock in lieu of 250,000,000 shares of common stock. In connection with these stock purchase agreements, the Company issued 57,019,761 shares of common stock and 725 shares of preferred stock in lieu of finders’ fees, which represents stock offering costs. Finders’ fees are treated as a reduction in paid in capital per current accounting guidance.

 

During the nine months ended July 31, 2016, 692,943,784 shares of common stock were retired and converted to 694 shares of convertible preferred stock and 513 shares of preferred stock were converted to 513,000,000 shares of common stock. In addition, the Company issued 664 shares of convertible preferred stock to its employee and consultants for services rendered. These shares were value at $2,062,798 based on closing price of the underlying common stock if converted.

 

During the nine months ended July 31, 2016, 8 shares of preferred stock were retired and cancelled.

 

In February 2016, the Company issued 220 shares of preferred stock to an accredited investor in lieu of 220,000,000 shares of common stock sold in June 2015.

 

During the nine months ended July 31, 2016, the Company sold 414 shares of its preferred stock for $238,500. As of July 31, 2016, 409 of these shares had not been issued and were recorded as preferred stock to be issued.

 

At July 31, 2016 and October 31, 2015, there were 4,007 and 2,945 shares issued and outstanding, respectively.

 

Common Stock

 

The Company is authorized to issue up to 4,500,000,000 shares of its $0.001 common stock.

 

At July 31, 2016 and October 31, 2015, there were 3,574,620,085 and 3,829,346,478 shares issued and outstanding, respectively.

 

Fiscal year 2015:

 

During the year ended October 31, 2015, the Company issued 387,000,000 shares of common stock for legal and consulting services rendered. The shares were valued at $425,000 based on service invoice and the closing stock prices on the dates of the stock grants.

 

During the year ended October 31, 2015, the Company entered into various purchase agreements with an accredited investor for the sale of 478,000,000 shares of its common stock at a price ranged from $0.00035 to $0.0012 per share. Total cash proceeds from the sale of stock during the year ended October 31, 2015, was $510,000. As of October 31, 2015, the Company issued 228,000,000 shares of common stock and 250 shares of preferred stock in lieu of 250,000,000 shares of common stock. In connection with these stock purchase agreements, the Company issued 57,019,761 shares of common stock and 725 shares of preferred stock in lieu of finders’ fees, which represents stock offering costs. Finders’ fees are treated as a reduction in paid in capital per current accounting guidance.

 

During the year ended October 31, 2015, the Company also issued 3,737,696,430 shares upon conversion of convertible notes amounted to $382,077.

 

During the year ended October 31, 2015, 759,817,144 shares of common stock were retired and converted to 767 shares of convertible preferred stock.

 

Fiscal year 2016:

 

During the nine months ended July 31, 2016, 692,943,784 shares of common stock were retired and converted to 694 shares of convertible preferred stock and 513 shares of preferred stock were converted to 513,000,000 shares of common stock. In addition, 201,000,000 shares owned by two shareholders were retired and cancelled.

 

In the Company’s quarterly report on Form 10-Q for the six months ended April 30, 2016 (the “April 2016 10-Q”) the Company reported that they issued a total of 194,000,000 shares of common stock upon conversion of 194 shares of preferred stock. In actuality, the Company issued an additional 279,000,000 shares of common stock upon conversion of 279 shares of preferred stock, for a total issuance of 473,000,000 shares of common stock upon conversion of 473 shares of preferred stock during the six months ended April 30, 2016. 279,000,000 shares of common stock issued during this six-month period following conversion of 279 shares of preferred stock were improperly allocated and disclosed as shares issued to consultants for services rendered, which disclosure has been updated as set forth below.

 

During the nine months ended July 31, 2016, the Company issued 29,000,000 shares of common stock for consulting services rendered. The shares were valued at $81,600 based on the closing stock prices on the dates of the stock grants. In the Company’s April 2016 10-Q, the Company erroneously reported that they issued 358,000,000 shares of common stock to consultants for services rendered during the six months ended April 30, 2016. As described above, 279,000,000 of these shares of common stock were actually issued upon conversion of 279 shares of preferred stock during the six months ended April 30, 2016 and were improperly allocated as shares issued to consultants for services rendered in the April 2016 10-Q. Further, 50,000,000 shares of common stock previously described in the April 2016 10-Q as shares issued to consultants for services rendered were erroneously issued and have subsequently been cancelled.

 

In July 2016, the Company issued 97,217,391 shares of common stock in consideration of cancellation of $43,000 of accrued and unpaid payables. The Company did not receive any cash proceeds upon these issuances.

 

These issuances were exempt pursuant to Section 4(a)(2) of the Securities Act.

 

Options and Warrants

 

A summary of option activity during the nine months ended July 31, 2016 and the year ended October 31, 2015 are presented below:

 

   July 31, 2016   October 31, 2015 
       Weighted   Weighted       Weighted   Weighted 
       average   average       average   average 
   Number of   exercise   life   Number of   exercise   life 
   shares   price   (years)   shares   price   (years) 
                         
Outstanding at beginning of year   140,666,667   $0.0146    9.27    52,666,667   $0.08    6.24 
Granted               138,000,000    0.0146    10.00 
Exercised                        
Forfeited               50,000,000    0.08    6.24 
Cancelled                        
Expired                        
                               
Outstanding at end of period   140,666,667   $0.0146    8.77    140,666,667   $0.0146    9.27 
                               
Options exercisable at end of period   140,666,667   $0.0146    8.52    140,666,667   $0.0146    9.27 

 

A summary of warrant activity during the nine months ended July 31, 2016 and the year ended October 31, 2015 are presented below:

 

   July 31, 2016   October 31, 2015 
       Weighted   Weighted       Weighted   Weighted 
       average   average       average   average 
       exercise   remaining       exercise   remaining 
   Number   price   contractual   Number   price   contractual 
   Outstanding   per share   life (years)   Outstanding   per share   life (years) 
Outstanding at beginning of year   4,000,000   $0.75    5.39    4,000,000   $0.75    6.39 
Granted                           
Exercised                        
Forfeited                        
Cancelled                        
Expired                        
                               
Outstanding at end of period   4,000,000   $0.75    4.64    4,000,000   $0.75    5.39 
                               
Warrants exercisable at end of period      $           $     

 

In November 2014, the Company granted options to all board members to purchase a total of 138,000,000 shares at an exercise price of $0.0146 per share of its common stock for service rendered and to replace the old options. These options vests in 4 equal amounts on the grant date, 2/9/2015, 5/9/2015, and 8/9/2015 and are exercisable within 10 years from the dates of vesting. The total estimated value using the Black-Scholes Model, based on the following variables, was $2,760,000.

 

Market Price: $0.020

Exercise Price: $0.015

Term: 10 years

Volatility: 321%

Dividend Yield: 0

Risk Free Interest Rate: 2.25%

 

For the year ended October 31, 2015, $2,760,000 was fully amortized as stock based compensation.

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9. SUBSEQUENT EVENTS
9 Months Ended
Jul. 31, 2016
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

1.In August 2016, the Company issued 154,260,851 shares of common stock in consideration of cancellation of $41,560 of accrued and unpaid payables. The Company did not receive any cash proceeds upon these issuances. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

2.In August 2016, the Company issued 192,000,000 shares of common stock upon conversion of 192 shares of our convertible preferred stock. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

3.In August 2016, the Company issued 200 shares of our convertible preferred stock as compensation for services. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

4.In August 2016, the Company issued 406 shares of our convertible preferred stock sold during the period ended July 31, 2016. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

5.In September 2016, the Company entered into a consulting agreement with Woodward Global, Ltd. (“WG”), a Nevada corporation owned by Mr. Angus McKay, son of William R. McKay, the Company’s Chairman and CEO. Pursuant to the agreement, the Company will provide consulting services to WG for a period of twelve (12) months for a total consideration of $2,000,000.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Jul. 31, 2016
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S.) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and reflect all adjustments, consisting of normal recurring adjustments and other adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company, for the respective periods presented. The results of operations for an interim period are not necessarily indicative of the results that may be expected for any other interim period or the year as a whole. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended October 31, 2015, filed with the SEC on February 16, 2016.

Consolidation

Consolidation

 

Accounting policies used by the Company and the Company’s subsidiaries conform to US GAAP. Significant policies are discussed below. The Company’s consolidated accounts include the Company’s accounts and the accounts of the Company’s subsidiaries of which we own a 50% interest or greater.

 

These consolidated financial statements include the accounts of the parent company Trans-Pacific Aerospace Company, Inc., and the majority owned subsidiary: Godfrey. All intercompany transactions have been eliminated.

Non-controlling interests

Non-controlling interests

 

The Company accounts for changes in our controlling interests of subsidiaries according to Accounting Codification Standards 810 – Consolidations (“ASC 810”). ASC 810 requires that the Company record such changes as equity transactions, recording no gain or loss on such a sale.

 

The Company’s non-controlling interest arises from the purchase of equity in Godfrey. It represents the portion of Godfrey that is not owned. ASC 810 requires that the Company account for the equity and income or loss on that operation separately from the Company’s other activities. In the equity section of the Consolidated Balance Sheet, the Company presents the portion of the negative equity attributable to non-controlling interests in Godfrey. In the Consolidated Statement of Operations, the Company presents the portion of current period net loss in Godfrey attributable to non-controlling interests.

Use of Estimates

Use of Estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Equivalents

Cash and Cash Equivalents

 

Cash and cash equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. There were no cash equivalents at July 31, 2016 and October 31, 2015.

Concentration of Credit Risk

Concentration of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of FDIC insurance limits.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

 

The Company has adopted FASB Accounting Standards Codification (ASC) 360-10, Property, Plant and Equipment FASB ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

Indefinite-lived Intangible Assets

Indefinite-lived Intangible Assets

 

The Company has an indefinite-lived intangible asset (goodwill) relating to purchased blueprints, formulas, designs and processes for manufacturing and production of self-lubricated spherical bearings, bushings and rod-end bearings. The indefinite-lived intangible asset is not amortized; rather, it is tested for impairment at least annually by comparing the carrying amount of the asset with the fair value. An impairment loss is recognized if the carrying amount is greater than fair value.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The Company adopted FASB ASC 820 on October 1, 2008. Under this FASB, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has various financial instruments that must be measured under the new fair value standard including: cash and debt. The Company currently does not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

Cash, accounts payable, other payables, and accrued expenses reported on the balance sheet are estimated by management to approximate fair market value due to their short term nature.

 

The following tables provide a summary of the fair values of assets and liabilities:

 

       Fair Value Measurements at 
       July 31, 2016 
    Carrying Value July 31, 2016    Level 1    Level 2     Level 3  
Liabilities:                    
Convertible notes payable – currently in default  $260,000   $   $   $260,000 

 

       Fair Value Measurements at 
       October 31, 2015 
    Carrying Value October 31, 2015    Level 1    Level 2     Level 3  
Liabilities:                    
Convertible notes payable, net  $8,333   $   $   $8,333 
Convertible notes payable – currently in default  $260,000   $   $   $260,000 

 

The Company believes that the market rate of interest as of July 31, 2016 and October 31, 2015 was not materially different to the rate of interest at which the convertible notes payable were issued. Accordingly, the Company believes that the fair value of the convertible notes payable approximated their carrying value at July 31, 2016 and October 31, 2015 due to short term maturity.

Revenue Recognition

Revenue Recognition

 

We received the initial order for our spherical bearings in December 2015. We manufactured and delivered these bearings in March 2016. The Company recognizes revenue on sales of products when the goods are delivered and title to the goods passes to the customer provided that: (i) there are no uncertainties regarding customer acceptance; (ii) persuasive evidence of an arrangement exists; (iii) the sales price is fixed and determinable; and (iv) collectability is reasonably assured.

Income Taxes

Income Taxes

 

The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.

 

The accounting guidance for uncertainties in income tax prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company recognizes a tax benefit from an uncertain tax position in the consolidated financial statements only when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority’s widely understood administrative practices and precedents.

Equipment

Equipment

 

Equipment is recorded at cost and depreciated using straight line methods over the estimated useful lives of the related assets. The Company reviews the carrying value of long-term assets to be held and used when events and circumstances warrant such a review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. The cost of normal maintenance and repairs is charged to operations as incurred. Major overhaul that extends the useful life of existing assets is capitalized. When equipment is retired or disposed, the costs and related accumulated depreciation are eliminated and the resulting profit or loss is recognized in income. As of July 31, 2016, the useful lives of the office equipment ranged from five years to seven years.

Issuance of Shares for Non-Cash Consideration to Non-Employees

Issuance of Shares for Non-Cash Consideration to Non-Employees

 

The Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods and services received or the fair value of the equity instrument at the time of issuance, whichever is more readily determinable. The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of standards issued by the FASB. 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.

Stock-Based Compensation

Stock-Based Compensation

 

Stock-based compensation cost to employees is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC 718. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit.

Net Loss Per Share

Net Loss Per Share

 

The Company adopted the standard issued by the FASB, which requires presentation of basic earnings or loss per share and diluted earnings or loss per share. Basic income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) are similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if dilutive securities at the end of the applicable period were exercised. There were convertible notes, 4,007 shares of convertible preferred stock, 2,000,000 Series A Warrants, 2,000,000 Series B Warrants and options for 140,666,667 shares outstanding as of July 31, 2016 that are not included in the calculation of Diluted EPS as their impact would be anti-dilutive.

 

   For the Nine Months Ended
July 31,
 
   2016   2015 
         
Net loss attributable to the Company  $(2,587,057)  $(4,462,523)
           
Basic and diluted net loss from operations per share  $(0.00)  $(0.00)
           
Weighted average number of common shares outstanding,
basic and diluted
   3,356,733,681    1,372,910,658 
Recently Adopted and Recently Enacted Accounting Pronouncements

Recently Adopted and Recently Enacted Accounting Pronouncements

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders' equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 during the quarter ended May 31, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

 

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.

 

In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).

 

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

 

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

 

  a. Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)
     
  b. Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
     
  c. Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

 

  a. Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern
     
  b. Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
     
  c. Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

 

In February, 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.

 

In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this Update defer the effective date of ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

XML 26 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
9 Months Ended
Jul. 31, 2015
Accounting Policies [Abstract]  
Schedule of fair values of assets and liabilities

       Fair Value Measurements at 
       July 31, 2016 
    Carrying Value July 31, 2016    Level 1    Level 2     Level 3  
Liabilities:                    
Convertible notes payable – currently in default  $260,000   $   $   $260,000 

 

       Fair Value Measurements at 
       October 31, 2015 
    Carrying Value October 31, 2015    Level 1    Level 2     Level 3  
Liabilities:                    
Convertible notes payable, net  $8,333   $   $   $8,333 
Convertible notes payable – currently in default  $260,000   $   $   $260,000 
Schedule of Earnings Per Share Basic and Diluted
   For the Nine Months Ended
July 31,
 
   2016   2015 
         
Net loss attributable to the Company  $(2,587,057)  $(4,462,523)
           
Basic and diluted net loss from operations per share  $(0.00)  $(0.00)
           
Weighted average number of common shares outstanding,
basic and diluted
   3,356,733,681    1,372,910,658 
XML 27 R18.htm IDEA: XBRL DOCUMENT v3.5.0.2
8. CAPITAL STOCK TRANSACTIONS (Tables)
9 Months Ended
Jul. 31, 2016
Capital Stock Transactions Tables  
Summary of option activity

A summary of option activity during the nine months ended July 31, 2016 and the year ended October 31, 2015 are presented below:

 

   July 31, 2016   October 31, 2015 
       Weighted   Weighted       Weighted   Weighted 
       average   average       average   average 
   Number of   exercise   life   Number of   exercise   life 
   shares   price   (years)   shares   price   (years) 
                         
Outstanding at beginning of year   140,666,667   $0.0146    9.27    52,666,667   $0.08    6.24 
Granted               138,000,000    0.0146    10.00 
Exercised                        
Forfeited               50,000,000    0.08    6.24 
Cancelled                        
Expired                        
                               
Outstanding at end of period   140,666,667   $0.0146    8.77    140,666,667   $0.0146    9.27 
                               
Options exercisable at end of period   140,666,667   $0.0146    8.52    140,666,667   $0.0146    9.27 

 

Summary of warrant activity

A summary of warrant activity during the nine months ended July 31, 2016 and the year ended October 31, 2015 are presented below:

 

   July 31, 2016   October 31, 2015 
       Weighted   Weighted       Weighted   Weighted 
       average   average       average   average 
       exercise   remaining       exercise   remaining 
   Number   price   contractual   Number   price   contractual 
   Outstanding   per share   life (years)   Outstanding   per share   life (years) 
Outstanding at beginning of year   4,000,000   $0.75    5.39    4,000,000   $0.75    6.39 
Granted                           
Exercised                        
Forfeited                        
Cancelled                        
Expired                        
                               
Outstanding at end of period   4,000,000   $0.75    4.64    4,000,000   $0.75    5.39 
                               
Warrants exercisable at end of period      $           $     

Assumptions

Market Price: $0.020

Exercise Price: $0.015

Term: 10 years

Volatility: 321%

Dividend Yield: 0

Risk Free Interest Rate: 2.25%

XML 28 R19.htm IDEA: XBRL DOCUMENT v3.5.0.2
1. BACKGROUND AND ORGANIZATION (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Jul. 31, 2016
Jul. 31, 2015
Jul. 31, 2016
Jul. 31, 2015
Oct. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]          
Net loss from operations $ (446,339) $ (1,507,292) $ (2,681,864) $ (4,582,913)  
Accumulated deficit $ (23,402,037)   $ (23,402,037)   $ (20,814,980)
XML 29 R20.htm IDEA: XBRL DOCUMENT v3.5.0.2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Fair Value Assets and Liabilities) - Fair Value, Measurements, Recurring [Member] - USD ($)
Jul. 31, 2016
Oct. 31, 2015
Convertible note payable   $ 8,333
Convertible notes payable - currently in default $ 260,000 260,000
Level 1 [Member]    
Convertible note payable   0
Convertible notes payable - currently in default 0 0
Level 2 [Member]    
Convertible note payable   0
Convertible notes payable - currently in default 0 0
Level 3 [Member]    
Convertible note payable   8,333
Convertible notes payable - currently in default $ 260,000 $ 260,000
XML 30 R21.htm IDEA: XBRL DOCUMENT v3.5.0.2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Net Loss Per Share) - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended
Jul. 31, 2016
Jul. 31, 2015
Jul. 31, 2016
Jul. 31, 2015
Oct. 31, 2015
Accounting Policies [Abstract]          
Net loss attributable to the Company $ (405,134) $ (1,466,083) $ (2,587,057) $ (4,462,523) $ (4,750,630)
Basic and diluted net loss from operations per share $ 0.00 $ 0.00 $ 0.00 $ 0.00  
Weighted average number of common shares outstanding, basic and diluted 3,462,184,357 3,274,015,518 3,356,733,681 1,372,910,658  
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
9 Months Ended 12 Months Ended
Jul. 31, 2016
Oct. 31, 2015
Cash equivalents $ 0 $ 0
Useful lives of the office equipment   5 to 7 years
Convertible preferred stock [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share 4,007  
Series A Warrants [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share 2,000,000  
Series B Warrants [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share 2,000,000  
Options [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share 140,666,667  
XML 32 R23.htm IDEA: XBRL DOCUMENT v3.5.0.2
3. ACCOUNTS RECEIVABLE (Details Narrative) - USD ($)
Jul. 31, 2016
Oct. 31, 2015
Receivables [Abstract]    
Accounts receivable $ 109,140 $ 0
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.5.0.2
4. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)
9 Months Ended
Jul. 31, 2016
Jul. 31, 2015
Oct. 31, 2015
Property, Plant and Equipment [Abstract]      
Office equipment, net $ 2,801   $ 3,704
Accumulated depreciation 5,605   $ 4,702
Depreciation expense $ 903 $ 903  
XML 34 R25.htm IDEA: XBRL DOCUMENT v3.5.0.2
5. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
9 Months Ended
Jul. 31, 2016
Oct. 31, 2015
Other payables - related parties $ 264,773 $ 58,975
Harbin Aerospace Company [Member]    
Other receviables - related parties 938 1,025
Various Shareholders [Member]    
Proceeds from related parties 171,525  
Godfrey [Member] | Peter Liu [Member]    
Other payables - related parties 60,000 $ 60,000
One Shareholder [Member]    
Proceeds from related parties 77,186  
Apollo Capital Corp. [Member]    
Other payables - related parties 205,711  
Debt converted, amount converted $ 43,000  
Debt converted, shares issued 97,217,391  
XML 35 R26.htm IDEA: XBRL DOCUMENT v3.5.0.2
6. CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended
Jul. 31, 2016
Jul. 31, 2015
Jul. 31, 2016
Jul. 31, 2015
Oct. 31, 2015
Imputed interest     $ 13,650 $ 13,650  
Repayments of convertible notes     0 48,000  
Derivative expenses $ 0 $ 0 0 486,359  
Derivative liability 0   0   $ 0
Convertible note balances, net 0   0   8,333
Discount on convertible notes $ 0   0   $ 41,667
HAC convertible note [Member]          
Imputed interest     13,650 13,650  
Convertible Notes Payable [Member]          
Common stock issued upon conversion of notes payable, shares         3,737,696,430
Debt converted, amount converted         $ 382,077
Derivative expenses     $ 0 $ 55,062  
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.5.0.2
7. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Jul. 31, 2016
Jul. 31, 2015
Jul. 31, 2016
Jul. 31, 2015
Oct. 31, 2015
Preferred stock issued 4,007   4,007   2,945
Consulting fee $ 269,400 $ 74,500 $ 2,337,000 $ 173,500  
McKay [Member]          
Accrued salaries 0   0   $ 0
Nicholas Nguyen [Member]          
Consulting accrued expense $ 150,000   $ 150,000    
Preferred stock issued 300   300    
Consulting fee     $ 1,260,000    
Lixin Chen [Member]          
Consulting accrued expense $ 1,260,000   $ 1,260,000    
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.5.0.2
8. CAPITAL STOCK TRANSACTIONS (Details - Option activity) - Stock Options [Member] - $ / shares
9 Months Ended 12 Months Ended
Jul. 31, 2016
Oct. 31, 2015
Number of Options Outstanding, Beginning 140,666,667 52,666,667
Number of Options Granted 0 138,000,000
Number of Options Exercised 0 0
Number of Options Forfeited 0 50,000,000
Number of Options Cancelled 0 0
Number of Options Expired 0 0
Number of Options Outstanding, Ending 140,666,667 140,666,667
Number of Options Exercisable 140,666,667 140,666,667
Weighted Average Exercise Price Outstanding, Beginning $ .0146 $ .08
Weighted Average Exercise Price Granted .0146
Weighted Average Exercise Price Exercised
Weighted Average Exercise Price Forfeited .08
Weighted Average Exercise Price Canceled
Weighted Average Exercise Price Expired
Weighted Average Exercise Price Outstanding, Ending .0146 .0146
Weighted Average Exercise Price Exercisable $ .0146 $ .0146
Weighted Average Remaining Contractual Life (in years) Outstanding, Beginning 9 years 3 months 7 days 6 years 2 months 27 days
Weighted Average Remaining Contractual Life (in years) granted   10 years
Weighted Average Remaining Contractual Life (in years) forfeited   6 years 2 months 27 days
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending 8 years 9 months 7 days 9 years 3 months 7 days
Weighted Average Remaining Contractual Life (in years) Exercisable 8 years 6 months 7 days 9 years 3 months 7 days
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.5.0.2
8. CAPITAL STOCK TRANSACTIONS (Details - Warrants outstanding) - Warrant [Member] - $ / shares
9 Months Ended 12 Months Ended
Jul. 31, 2016
Oct. 31, 2015
Warrants outstanding, beginning balance 4,000,000 4,000,000
Warrants outstanding, ending balance 4,000,000 4,000,000
Warrants exercisable   0
Weighted average exercise price, beginning $ .75 $ 0.75
Weighted average exercise price, ending $ 0.75 $ .75
Weighted average remaining contractual life, beginning 5 years 4 months 21 days 6 years 4 months 21 days
Weighted average remaining contractual life, ending 4 years 7 months 21 days 5 years 4 months 21 days
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.5.0.2
8. CAPITAL STOCK TRANSACTIONS (Details - Assumptions)
9 Months Ended
Jul. 31, 2016
$ / shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Market Price: $ 0.20
Exercise Price: $ .015
Term: 10 years
Volatility: 321.00%
Dividend Yield: 0.00%
Risk Free Interest Rate: 2.25%
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.5.0.2
8. CAPITAL STOCK TRANSACTIONS (Details Narrative) - USD ($)
9 Months Ended 12 Months Ended
Jul. 31, 2016
Jul. 31, 2015
Oct. 31, 2015
Preferred stock converted to common stock, common stock issued value $ (1)    
Proceeds from sale of preferred stock $ 238,500 $ 22,000  
Preferred stock to be issued 60   0
Stock based compensation $ 2,144,398 $ 3,607,500  
Stock issued for services, shares issued 358,000,000    
Stock issued for services, value $ 871,200    
Common stock, shares issued 3,574,620,085   3,829,346,478
Preferred stock, shares issued 4,007   2,945
Common stock issued upon conversion of notes payable     $ 382,078
Common stock issued in consideration of cancellation of accrued and unpaid payables, shares 97,217,391    
Common stock issued in consideration of cancellation of accrued and unpaid payables, value $ 43,000    
Estimated fair value of option award     2,760,000
Stock Options [Member]      
Stock based compensation     $ 2,760,000
Convertible Notes Payable [Member]      
Common stock issued upon conversion of notes payable, shares     3,737,696,430
Common stock issued upon conversion of notes payable     $ 382,077
Accredited Investors [Member]      
Proceeds from sale of preferred stock     $ 22,000
Preferred stock to be issued     220
Stock issued for cash, shares issued     478,000,000
Stock issued for cash, proceeds     $ 510,000
Common stock, shares issued     228,000,000
Preferred stock, shares issued     250
Stock issued for finders fees, shares issued     57,019,761
Preferred stock issued in lieu of finders fees. shares issued     725
An Accredited Investor [Member]      
Preferred stock, shares issued 220    
Consultants [Member]      
Stock issued for services, shares issued     387,000,000
Stock issued for services, value     $ 425,000
Employee and Consultants [Member]      
Stock issued for services, shares issued 29,000,000   1,203
Stock issued for services, value $ 81,600   $ 645,000
Preferred Stock [Member]      
Common stock retired and converted, common shares retired 694   759,817,144
Common stock retired and converted, preferred shares issued 513    
Preferred stock retired and cancelled, shares 8    
Preferred stock to be issued 409    
Preferred stock, shares issued 414    
Common Stock [Member]      
Common stock retired and converted, common shares retired 692,943,784    
Common stock retired and converted, preferred shares issued 513,000,000   767
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