UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM
10
General
Form for Registration of Securities of Small Business Issuers Under Section 12(g) of the Securities Exchange Act of 1934
Favo
Realty, Inc.
(Exact Name Of Company As Specified In Its Charter)
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Nevada
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88-04360717
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(State
of Incorporation)
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(I.R.S.
Employer Identification No.)
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1461
Franklin Ave., 1st Fl. South, Garden City, NY
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11530
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(Address
of Principal Executive Offices)
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(ZIP
Code)
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Company’s
Telephone Number, Including Area Code: (516) 835-7075
Securities
to be Registered Under Section 12(g) of the Act: Common Stock, $0.001
(Title of Class)
Indicate
by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☐
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Smaller
reporting company
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☒
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Emerging growth company
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☐
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If
an emerging growth company, indicate by check mark if the Company has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
TABLE
OF CONTENTS
PART
I
ITEM
1. DESCRIPTION OF BUSINESS
Some
of the statements contained in this amended registration statement on Form 10 of Favo Realty, Inc. (hereinafter the “Company”,
“we” or the “Company”) discuss future expectations, contain projections of our plan of operation or financial
condition or state other forward-looking information. In this registration statement, forward-looking statements are generally
identified by the words such as “anticipate”, “plan”, “believe”, “expect”, “estimate”,
and the like. Forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results
or plans to differ materially from those expressed or implied. These statements are subject to known and unknown risks, uncertainties,
and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using numerous assumptions. A reader, whether investing in the Company’s
securities or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this
Registration Statement. Important factors that may cause actual results to differ from projections include, for example:
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the success or failure of Management’s efforts to implement
the Company’s plan of operation;
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the ability of the Company to fund its operating expenses;
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the ability of the Company to compete with other companies
that have a similar plan of operation;
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the effect of changing economic conditions impacting our
plan of operation;
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the ability of the Company to meet the other risks as may
be described in future filings with the SEC.
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General
Background of the Company
Favo
Realty, Inc. was incorporated as Beeston Enterprises Ltd. (“the Company”) on July 12, 1999 under the laws of the State
of Nevada. The Company changed its name to Favo Realty, Inc. on December 26, 2018, which was then declared effective by the Financial
Industry Regulatory Authority (“FINRA”) on January 9, 2019. Previously, the Company was an exploration stage company
engaged in the search of mineral deposits that could be developed to a state of a commercially viable producing mine. Currently,
the Company is a real estate investment company which intends to invest in a diversified portfolio of quality commercial real
estate properties and other real estate investments located throughout the United States and Puerto Rico. The Company intends
to have a dual investment strategy. The majority of the portfolio will be invested in what the company considers its Core Holdings.
The objective for these core holdings is to own stabilized, fully leased, secure real estate assets that provide durable, predictable
cash flow to the Company. A smaller percentage of the portfolio will be invested in what the Company classifies as Value-Add &
Opportunistic Real Estate. These investments may include development or redevelopment projects, repositioning of an asset and
could include making physical improvements to a property that will allow for higher rents and increased occupancy rates.
On
May 30, 2014, the Company received approval a 1-for-10 reverse stock split on its common stock outstanding from FINRA. On January
8, 2019, the Company received approval a 1-for-50 reverse stock split on its common stock outstanding from FINRA, as well as its
symbol to “FAVO.”
On
October 4, 2018, the eight judicial District Court of Nevada appointed Custodian Ventures, LLC as custodian for Beeston Enterprises
Ltd., proper notice having been given to the officers and directors of Beeston Enterprises Ltd. There was no opposition.
On
October 12, 2018, the Company filed a certificate of reinstatement with the state of Nevada, and appointed David Lazar as, President,
Secretary, Treasurer and Director.
On
October 19, 2018, the Company obtained a promissory note in amount of $464,150 from its custodian, Custodian Ventures, LLC, the
managing member being David Lazar. The note bears an interest of 3% and matures in 180 days from the date of issuance.
On
October 19, 2018, the Company issued 473,350,000 shares of common stock, with par value $0.001 for par value payable in cash and
a promissory note issued on that same day for $464,150, to Custodian Ventures, LLC. In addition, David Lazar thereafter, published
all of the missing filings with OTC Markets for the Company, so that it became current with Pink Sheets information. There was
no party that requested such services. Prior to October 19, 2018, Custodian Ventures, LLC held a de-minimus amount of shares of
capital stock in the Company
On
October 29, 2018, the Company terminated its registration with the Securities and Exchange Commission.
On
December 6, 2018, the Company issued 25,000,000 shares of super-voting shares of Series C Preferred Stock to Custodian Ventures,
LLC in exchange for services rendered to, and fees incurred by, the Company.
On
December 12, 2018, Custodian Ventures, LLC sold (i) the 25,000,000 shares of Series C Preferred Stock to Vincent Napolitano, (ii)
5,000,000 shares of common stock to Liro Holdings, LLC, and (iii) 468,350,000 shares of common stock to Favo Group, LLC for an
aggregate purchase price of $175,000. At this point there was a change of control of the Company and David Lazar resigned as President,
Secretary, Treasurer and Director and Vincent Napolitano was appointed as President, Secretary, Treasurer and Director.
Mr.
Napolitano is considered, and shall be treated as, a promoter for the Company.
On
December 26, 2018, the Company changed its name from Beeston Enterprises Ltd. to Favo Realty, Inc.
On
April 6, 2019, the Company acquired all of the assets (the “Assets”) of RLT Atwood International, LTD (“RLT”)
for 9,646,586 shares of common stock of the Company, issued to the shareholders of RLT.
The
Assets were contributed and rebranded under FAVO Blockchain, Inc, a wholly owned subsidiary of FAVO Realty, Inc. FAVO Blockchain,
Inc. is primarily a digital currency mining company who believes that mining has and will be the cornerstone of digital token
and decentralized ledger technology. Contrary to investing strictly in the virtual space, mining provided an opportunity of realizing
blockchain assets with a more tangible and a traditional approach. Digital currency mining involves earning block rewards and
transaction fees. These rewards are given in return for hardware efforts to process transactions through digital ledger exploration
systems.
FAVO
Blockchain, Inc. did not manage its mining operation. FAVO Blockchain sold its entire inventory of ASIC and associated equipment
to Hydro66 Holdings Corp for a nominal amount in return for a hash rate equivalent cloud services contract. This contract was
to be delivered from Hydro66 Holdings Corp’s data center in Boden, Sweden. Hydro66 Holdings Corp provides a managed
hashrate service contract and provides read access pool visibility which will show payouts, rewards history and performance data.
At this colocation datacenter they host third party IT infrastructure and provide purpose-built space and cooling, telecoms, IT
support services and 24/7 physical security. This data center is an ISO27001 accredited facility. Hydro66 Holdings Corp is quoted
on the OTCQB Markets under the symbols HYHDF and also trades in Canada on the CSE under the symbol “SIX”.
Consequently,
the Company ceased to fall under the definition of shell company as define in Rule 12b-2 under the Exchange Act of 1934, as amended
(the “Exchange Act”).
On July 2, 2019, the Company formed
Favo Blockchain, Inc. (“Blockchain”) and contributed all of the Assets to Blockchain which now operates the blockchain
business. On August 5, 2019, Hydo66 Svenska AB (“Hydro66”) purchased the Assets from Blockchain for 1 SEK Hydro66,
and Hydro66 provided a managed hash rate service for FAVO Blockchain, Inc, Hydro66 have installed, powered up and configured the
mining equipment. This includes managed switch LAN infrastructure, shelves and airflow containment, and WAN gateway device. The
mining infrastructure was connected to a mining pool under Hydrio66 management and they provided FAVO Blockchain, Inc read access
pool visibility.
Our business purpose for initially
engaging in digital currency mining was an opportunistic one, the opportunity to generate revenue and profit was viable. The Bitcoin
markets appeared to be on the rise and the sentiment both short and long-term for the price of Bitcoin was bullish. The mining
contract with HYDRO66 Holdings had no downside risk to FAVO and had significant upside potential. The contract as agreed upon
stated that any and all losses in mining would be credited back to FAVO from Hydro66. If the price of BTC mined exceeded the costs,
FAVO would be entitled to 100% of the profit. If the price of BTC dropped below profitability for HYDRO66 at their discretion
they could turn the equipment off until such time that it turned profitable. Over the last few months the price of bitcoin has
not been as bullish as anticipated and much more volatile than expected. The Company decided to sell the cryptocurrency mining
operation to focus on real estate investing. The Company also believes these machines if not profitable soon would become absolute
at some point in the near future and it is in the Company’s best interest to sell them and focus on Commercial Real Estate.
On January 31, 2020, the Company sold
Favo Blockchain Inc. to Basebay, LLC for $125,000.
Mr.
Napolitano has over 25 years of Wall Street experience, specializing in Capital Markets, Real Estate & Private Equity. Since
May of 2016 he served as Executive VP of Finance & Capital Markets for Richmond Honan Development & Acquisitions, L.L.C.
where he raised equity & debt to finance the acquisitions of 700,000 SF of medical office buildings (MOB) in multiple states.
He has served as Chief Investment Officer for several Special Purpose Vehicles, including Social Network Fund, LLC and Social
Media & Technology Fund, LLC, designed to acquire private stock in pre-initial public offerings.
Business
Objectives of the Company
Since
the custodial proceedings, the Company had no business operations. Management had determined to direct its efforts and limited
resources to pursue potential new business opportunities. Such opportunity was presented by the change in control and the new
business objective as directed by Mr. Napolitano. Now, the Company is a real estate investment company which intends to invest
in a diversified portfolio of quality commercial real estate properties and other real estate investments located throughout the
United States and Puerto Rico. The Company intends to have a dual investment strategy. The majority of the portfolio will be invested
in what the company considers its Core Holdings. The objective for these core holdings is to own stabilized, fully leased, secure
real estate assets that provide durable, predictable cash flow to the Company. A smaller percentage of the portfolio will be invested
in what the Company classifies as Value-Add & Opportunistic Real Estate. These investments may include development or redevelopment
projects, repositioning of an asset and could include making physical improvements to a property that will allow for higher rents
and increased occupancy rates.
Other
than as mentioned above, the Company does not intend to limit itself to a particular geographical area and has not established
any particular criteria upon which it shall consider an investment opportunity.
The
Company intends to engage Favo Group, LLC, a related party, as its external manager of the properties acquired.
Management
Agreement: The acquired properties are to be externally managed and advised by the Favo Group, LLC (“Manager”)
under a 20-year agreement with extensions. Pursuant to the Management Agreement, our Manager will provide us with management team
and appropriate support personnel to implement our business strategy and perform certain services for us, subject to oversight
by our Board of Directors. The Manager will be responsible for, among other duties, performing and administering all our day-to-day
operations, determining investment criteria in conjunction with our Board of Directors, sourcing, analyzing and executing asset
acquisitions, sales and financings, performing asset management duties, performing property management duties, and performing
financial and accounting management.
FAVO
Blockchain was externally managed and advised by the Favo Group, LLC (“Manager”) under a 5-year arm’s-length
agreement with extensions.
We
plan to reimburse Manager up to 2% non-accountable of gross offering proceeds from all offerings for organization, offering and
marketing expenses. We plan to pay our Manager 1.5% of the total contract purchase price of each property acquired. We plan to
reimburse Manager for expenses incurred (including personnel costs) related to selecting, evaluating and making investments on
our behalf, regardless of whether we make the related investment. Personnel costs associated with providing such services will
be determined based on the amount of time incurred by the applicable employee of Manager and the corresponding payroll and payroll
related costs incurred by Manager. In addition, we also will pay third parties, or reimburse Manager or its affiliates, for any
investment-related expenses due to third parties, including, but not limited to, legal fees and expenses, travel and communications
expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finder’s fees, title insurance expenses,
survey expenses, property inspection expenses and other closing costs, regardless of whether we make the related investment.
We
also plan to pay Manager a loan coordination fee equal to 1.5% of any assumed, new or supplemental debt incurred in connection
with an acquired property, or of 1.5% of 65% of the purchase price if the asset is not leveraged. In connection with the payment
of any loan coordination fee, the amount of that loan coordination fee will be reduced by the aggregate amount of all loan coordination
fees and loan origination fees previously paid on the same real estate or real estate-related asset. We will pay to Manager or
its permitted assignees the loan coordination fee promptly upon the closing of the financing or refinancing.
We
will pay Manager a monthly fee equal to one-twelfth of 1.50% of the total value of our assets (including cash or cash equivalents)
based on the adjusted cost of our assets before reduction for depreciation, amortization, impairment charges and cumulative acquisition
costs charged to expense in accordance with generally accepted accounting principles, or GAAP (adjusted cost will include the
purchase price, acquisition expenses, capital expenditures and other customarily capitalized costs) and as adjusted for appropriate
closing dates for individual asset acquisitions. This fee will be payable monthly in cash or shares of our common stock, at the
option of Manager. This fee will be appropriately pro-rated for any partial month. The Manager may request the management fees
be accelerated in advance up to 36 months. If the assets are disposed of prior to 36 months the Manager will return the accelerated
fees within 90 days.
If
our advisor or an affiliate provides property management and leasing services for our properties, we will pay fees equal to 4.0%
of gross revenues from the properties managed. We also will reimburse the property manager and its affiliates for property-level
expenses that any of them pay or incur on our behalf, including salaries, bonuses and benefits of persons employed by the property
manager and its affiliates except for the salaries, bonuses and benefits of persons who also serve as one of our executive officers
or as an executive officer of the property manager or its affiliates. Our advisor or an affiliate may subcontract the performance
of its property management and leasing services duties to third parties and pay all or a portion of its 4.0% property management
fee to the third parties with whom it contracts for these services. If we contract directly with third parties for such services,
we will pay them customary market fees and will pay Manager an oversight fee equal to 1.0% of the gross revenues of the property
managed. In no event will we pay our advisor or any affiliate both a property management fee and an oversight fee with respect
to any property.
We
plan to pay Manager a commission with respect to a new lease equal to 50% of the first month’s gross rent plus 4% of the remaining
fixed gross rent of the guaranteed lease term. In the event of co-broker participation in a new lease for an real estate asset,
the leasing commission determined for a new lease, with respect to such lease, will be 150% of the first month’s gross rent plus
6% of the remaining fixed gross rent of the guaranteed lease term. We will pay a commission to Manager with respect to a negotiated
renewal of an existing lease equal to 4% of the fixed gross rent of the guaranteed lease term or, in the event of a co-broker,
6% of the fixed gross rent of the guaranteed lease term. In no event shall the office leasing fees paid to Manager exceed customary
market rates. Manager may subcontract the performance of its office leasing duties to third parties or affiliates and pay all
or a portion of its office leasing fee to such persons with whom it contracts for these services. Manager will be responsible
for all fees payable to third parties or affiliates in connection with subcontracted office leasing duties. The office leasing
fee will be payable upon the earlier to occur of rent commencement or tenant’s opening for business.
Furthermore,
the Company plans to pay Manager a monthly fee equal to 2% of our monthly gross revenues in connection with the administration
of our day-to-day operations and the performance and supervision of the performance of such other administrative functions necessary
for our management. In addition to the general and administrative expenses fee, we may reimburse Manager for certain costs and
expenses it incurs in connection with the services it provides to us, including, but not limited to, personnel costs. The Company
will pay Manager a commission upon the sale of one or more of our properties or other assets in an amount equal to 1% of the sale
price of the asset, unless there is a conflict of interest. In such an instance, the fee will be waived
The
Company will pay the Manager a disposition fee upon the sale of one or more of the properties or other assets in an amount equal
to 1.5% of the total sale price.
The
Company plans to pay Manager a construction fee, development fee and landscaping fee at market rates customary and competitive
considering the size, type and location of the asset in connection with the construction, development or landscaping of a property.
The
Company’s common stock is subject to quotation on the OTC Pink Sheets under the symbol FAVO. There is currently a trading market
in the Company’s shares. There can be no assurance that there will be an active trading market for our securities will continue
following the effective date of this registration statement under the Exchange Act. In the event that an active trading market
continues, there can be no assurance as to the market price of our shares of common stock, whether any trading market will provide
liquidity to investors, or whether any trading market will be sustained.
Management
of the Company (“Management”) would have substantial flexibility in identifying and selecting a prospective property.
The Company is dependent on the judgment of its Management in connection with this process. In evaluating a prospective property,
we would consider, among other factors, the following:
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costs associated with pursuing a property;
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experiences, skills and availability of additional personnel
necessary to pursue a potential new business opportunity;
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necessary capital requirements;
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the competitive position of the property;
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stage of development; and
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the market acceptance of the potential services;
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The
foregoing criteria are not intended to be exhaustive and there may be other criteria that Management may deem relevant. In connection
with an evaluation of a prospective or potential opportunity, Management may be expected to conduct a due diligence review.
The
time and costs required to pursue new opportunities, which includes negotiating and documenting relevant agreements and preparing
requisite documents for filing pursuant to applicable securities laws, cannot be ascertained with any degree of certainty.
Management
intends to devote such time as it deems necessary to carry out the Company’s affairs. The exact length of time required for the
pursuit of any new potential opportunities is uncertain. No assurance can be made that we will be successful in our efforts. We
cannot project the amount of time that our Management will actually devote to the Company’s plan of operation.
The
Company intends to conduct its activities so as to avoid being classified as an “Investment Company” or a “Real
Estate Investment Trust” under the Investment Company Act of 1940, and therefore avoid application of the costly and restrictive
registration and other provisions of the Investment Company Act of 1940 and the regulations promulgated thereunder.
Very
Limited Liquidity of our Common Stock
Our
common stock trades on the OTC Pink Sheet Market. There is an active market maker in our common stock. However, there is only
limited liquidity in our common stock.
The
Company has not identified a target property
The
Company’s effort in identifying prospective target properties will only be limited to the United States and Puerto Rico. To date,
the Company has not selected any target property. To the extent that we acquire a property characterized by a high level of risk,
we may be affected by the currently unascertainable risks.
Sources
of target properties
Our
Management anticipates that target properties will be brought to our attention from various unaffiliated sources who may present
solicited or unsolicited proposals. Our Management may also bring to our attention target properties. While we do not presently
anticipate engaging the services of professional firms that specialize in finding available real estate on any formal basis, we
may engage these firms in the future, in which event we may pay a finder’s fee or other compensation in connection with an acquisition.
In no event, however, will we pay Management any finder’s fee or other compensation for services rendered to us prior to or in
connection with the consummation of an acquisition.
Selection
of a target property
Management
owns 58.165% of the issued and outstanding shares of common stock and 100% of the issued and outstanding preferred shares of the
Company, and will have broad flexibility in identifying and selecting a prospective target. In evaluating a prospective property,
our Management will consider, among other factors, the following:
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financial
condition of the property;
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experience
and skill of Management and availability of additional personnel;
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degree
of current or potential market acceptance of the services;
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regulatory
environment of the industry; and
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costs
associated with owning and/or improving the real estate.
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These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular property will be based, to the
extent relevant, on the above factors as well as other considerations deemed relevant by our Management consistent with our business
objective. In evaluating a prospective acquisition, we will conduct a due diligence review which will encompass, among other things,
inspection of the property, as well as review of financial and other information which will be made available to us.
We
will endeavor to structure an acquisition so as to achieve the most favorable tax treatment to us, our subsidiaries and our stockholders.
However, there can be no assurance that the Internal Revenue Service or applicable state tax authorities will necessarily agree
with the tax treatment of any acquisition we consummate.
The
time and costs required to select and evaluate a target and to structure and complete the acquisition cannot presently be ascertained
with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target that
is not ultimately completed will result in a loss to us.
Possible
lack of business diversification
While
we may seek to effect acquisitions with more than one target, it is more possible that we will only have the ability to effect
a single acquisition, if at all. Accordingly, the prospects for our success may be entirely dependent upon a single property.
Unlike other entities which may have the resources to complete several acquisitions, it is probable that we will lack the resources
to diversify our holdings or benefit from the possible spreading of risks or offsetting of losses. By consummating a single acquisition,
our lack of diversification may:
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subject
us to numerous economic, competitive and regulatory developments, and
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result
in our dependency upon the development or appreciation of a single or limited number of properties.
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Our
auditors have expressed substantial doubt about our ability to continue as a going concern
Our
audited financial statements for the years ended December 31, 2018 and 2017, were prepared using the assumption that we will continue
our operations as a going concern. Our independent accountants in their audit report have expressed substantial doubt about our
ability to continue as a going concern. Our operations are dependent on our ability to raise sufficient capital or complete acquisition
as a result of which we become profitable. Our financial statements do not include any adjustments that may result from the outcome
of this uncertainty. There is not enough cash on hand to fund our administrative expenses and operating expenses for the next
twelve months. Therefore, we may be unable to continue operations in the future as a going concern. If we cannot continue as a
viable entity, our stockholders may lose some or all of their investment in the Company’s shares of common stock.
Competition
In
identifying, evaluating and selecting a target property, we expect to encounter intense competition from other entities having
a business objective similar to ours. Many of these entities are well established and have extensive experience identifying and
effecting acquisitions, either directly or through affiliates. Many if not virtually most of these competitors possess far greater
financial, human and other resources compared to our resources. While we believe that there are numerous potential targets that
we may identify, our ability to compete in acquiring certain of the more desirable targets will be limited by our limited financial
and human resources. Our inherent competitive limitations are expected by Management to give others an advantage in pursuing the
acquisition of a target that we may identify and seek to pursue. Further, any of these limitations may place us at a competitive
disadvantage in successfully negotiating an acquisition. Our Management believes, however, that our status as a reporting public
entity with potential access to the United States public equity markets may give us a competitive advantage over certain privately-held
entities having a similar business objective in acquiring a desirable target with growth potential on favorable terms.
Employees
Vincent
Napolitano is our Chief Executive Officer, is one of our officers and directors. Mr. Shaun Quin is President of FAVO Group. LLC,
a 47.68% shareholder of the Company, is also an officer and director of the Company. They are not obligated to devote any specific
number of hours per week and, in fact, intends to devote only as much time as they deem reasonably necessary to administer the
Company’s affairs until such time as an additional acquisition is consummated. The amount of time they will devote in any time
period will vary based on the availability of suitable new target to investigate.
Vincent
Napolitano, 47, also serves as our Chairman of the Board of Directors. Shaun Quin, 37, also serves on our Board of Directors.
We do not intend to have any full-time employees prior to the consummation of an additional acquisition.
Conflicts
of Interest
The
Company’s Management is not required to commit its full time to the Company’s affairs. As a result, pursuing new business opportunities
may require a longer period of time than if Management would devote full time to the Company’s affairs. Management is not precluded
from serving as an officer or director of any other entity that is engaged in business activities similar to those of the Company.
Management has not identified and is not currently negotiating a new business opportunity for us. In the future, Management may
become associated or affiliated with entities engaged in business activities similar to those we intend to conduct. In such event,
Management may have conflicts of interest in determining to which entity a particular opportunity should be presented. In the
event that the Company’s Management has multiple business affiliations, our Management may have legal obligations to present certain
business opportunities to multiple entities. In the event that a conflict of interest shall arise, Management will consider factors
such as reporting status, availability of audited financial statements, current capitalization and the laws of jurisdictions.
If several opportunities approach Management with respect to an acquisition, Management will consider the foregoing factors as
well as the preferences of the Management of the operating company. However, Management will act in what it believes will be in
the best interests of the shareholders of the Company.
Description
of FAVO Blockchain, Inc.
The Assets were contributed and rebranded
under FAVO Blockchain, Inc, a previous wholly-owned subsidiary of FAVO Realty, Inc. formed on July 2, 2019. It, contracted with
Hydro66 Holdings Corp. to provide managed hashrate service and read access pool visibility which will show payouts, rewards history
and performance data. The Company has since sold Favo Blockchain, Inc. to Basebay LLC for $125,000. Therefore, we no longer intend
to use the information provided by Hydro66 in the Company’s operations. We previously conducted mining operations after
selling the digital mining assets acquired from RLT Atwood International to Hydro66. Using a hashrate equivalent contract, the
Company entered into a cloud-mining contract, otherwise known as the hashrate equivalent, which allowed FAVO Blockchain to mine
bitcoin indirectly and not have the large overhead and commitment to any potential downside if the markets did not go in our favor.
The hashrate contract protected the Company from any loss in operating overheads and allowed the Company to participate in 100%
of the upside potential, if any, on a monthly basis.
Introduction
to Blockchain and Cryptocurrency
Our business purpose for initially
engaging in digital currency mining was an opportunistic one, the opportunity to generate revenue and profit was viable. The Bitcoin
markets appeared to be on the rise and the sentiment both short and long-term for the price of Bitcoin was bullish. The mining
contract with HYDRO66 Holdings had no downside risk to FAVO and had significant upside potential. The contract as agreed upon
stated that any and all losses in mining would be credited back to FAVO from Hydro66. If the price of BTC mined exceeded the costs,
FAVO would be entitled to 100% of the profit. If the price of BTC dropped below profitability for HYDRO66 at their discretion
they could turn the equipment off until such time that it turned profitable. Over the last few months the price of bitcoin has
not been as bullish as anticipated and much more volatile than expected. The Company decided to sell the cryptocurrency mining
operation to focus on real estate investing. The Management also believes these machines if not profitable soon would become absolute
at some point in the near future and it is in the Company’s best interest to sell them and focus on Commercial Real Estate.
ITEM
1A. RISK FACTORS
Forward-Looking
Statements
This
amended registration statement on Form 10 contains forward-looking statements that are based on current expectations, estimates,
forecasts and projections about us, our future performance, the market in which we operate, our beliefs and our Management’s
assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on
our behalf. Words such as “expects”, “anticipates”, “targets”, “goals”, “projects”,
“intends”, “plans”, “believes”, “seeks”, “estimates”, variations of
such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict or assess. Therefore,
actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements.
Any
investment in our shares of common stock involves a high degree of risk. You should carefully consider the following information
about these risks, together with the other information contained in this annual report before you decide to invest in our common
stock. Each of the following risks may materially and adversely affect our business objective, plan of operation and financial
condition. These risks may cause the market price of our common stock to decline, which may cause you to lose all or a part of
the money you invested in our common stock. We provide the following cautionary discussion of risks, uncertainties and possible
inaccurate assumptions relevant to our business plan. In addition to other information included in this annual report, the following
factors should be considered in evaluating the Company’s business and future prospects.
Risks
Related to Our Business
The
Company has a limited operating history and very limited resources.
Since
being acquired through custodial proceedings, the Company’s operations have been limited to seeking a potential acquisition, and
the related change of control, and has had no revenues from operations. Investors will have no basis upon which to evaluate the
Company’s ability to achieve the Company’s business objective, which is to invest in a diversified portfolio of quality commercial
real estate properties and other real estate investments located throughout the United States and Puerto Rico. The Company intends
to have a dual investment strategy. The majority of the portfolio will be invested in what the company considers its Core Holdings.
The objective for these core holdings is to own stabilized, fully leased, secure real estate assets that provide durable, predictable
cash flow to the Company. A smaller percentage of the portfolio will be invested in what the Company classifies as Value-Add &
Opportunistic Real Estate. These investments may include development or redevelopment projects, repositioning of an asset and
could include making physical improvements to a property that will allow for higher rents and increased occupancy rates. The Company
will not generate any revenues until, at the earliest, after the consummation of an acquisition.
Our
auditors have expressed substantial doubt about our ability to continue as a going concern.
As
of December 31, 2018, we had zero cash and cash equivalents and an accumulated deficit of $nil. Our audited financial statements
for the years ended December 31, 2018 and December 31, 2018, were prepared using the assumption that we will continue our operations
as a going concern. Our independent accountants in their audit report have expressed substantial doubt about our ability to continue
as a going concern. Our operations are dependent on our ability to raise sufficient capital or complete acquisition as a result
of which we become profitable. Our financial statements do not include any adjustments that may result from the outcome of this
uncertainty.
There
is not enough cash on hand to fund our administrative expenses and operating expenses for the next twelve months. Therefore, we
may be unable to continue operations in the future as a going concern. If we cannot continue as a viable entity, our stockholders
may lose some or all of their investment in the Company’s shares of common stock.
Since
the Company has not yet selected a particular property to acquire, the Company is unable to ascertain the merits or risks associated
with any particular property.
Since
the Company has not yet identified a prospective target, there is no basis for investors to evaluate the possible merits or risks
of the target(s) which the Company may ultimately acquire. Although the Company’s Management intends to evaluate the risks inherent
in a particular acquisition, the Company cannot assure you that it will properly ascertain or assess all of the significant risk
factors. There can be no assurance that any prospective acquisition will benefit shareholders or prove to be more favorable to
shareholders than any other investment that may be made by shareholders and investors.
Unspecified
and unascertainable risks.
There
is no basis for shareholders to evaluate the possible merits or risks of potential acquisitions. Although Management will endeavor
to evaluate the risks inherent in a particular property, there can be no assurance that Management will properly ascertain or
assess all such risks that the Company perceived at the time of the consummation of an acquisition.
Dependence
on key personnel.
The
Company is dependent upon the continued services of Management. To the extent that his services become unavailable, the Company
will be required to obtain other qualified personnel and there can be no assurance that it will be able to recruit qualified persons
upon acceptable terms.
The
Company’s officers and directors may allocate their time to other businesses activities, thereby causing conflicts of interest
as to how much time to devote to the Company’s affairs and prioritize the availability of an acquisition with the Company. This
could have a negative impact on the Company’s ability to consummate an acquisition in a timely manner, if at all.
The
Company’s officers and directors are not required to commit his full time to the Company’s affairs, which may result in a conflict
of interest in allocating their time between the Company’s business and other businesses. The Company does not intend to have
any full-time employees prior to the consummation of an additional acquisition. Management of the Company is engaged in other
business endeavors and is not obligated to contribute any specific number of their hours per week to the Company’s affairs.
If
Management’s other business affairs require them to devote more time to such affairs, it could limit their ability to devote time
to the Company’s affairs or present the Company as a viable opportunity and could have a negative impact on the Company’s ability
to consummate an acquisition. Furthermore, we do not have an employment agreement with Mr. Napolitano or Mr. Quin.
We
rely on our senior management and will be harmed if any or all of them leave.
Our
success is dependent on the efforts, experience and relationships of the Favo Group, LLC (the “Manager”) and its Managing
Members, Vincent Napolitano and Shaun Quin. Should they become unable to continue in their respective roles, the Company’s
business would be adversely affected as to its business prospects and earnings potential. As a result, the success of the
Company, for the foreseeable future, depends solely on the abilities of the Manager. We do not currently carry any insurance to
compensate for any such loss. The Company and/or the Manager will consider purchasing key man insurance on the Manager and
possibly other key employees but there are no assurances that the Company and/or the Manager will obtain this insurance.
Conflicts
of Interest May Arise.
As
Vincent Napolitano is the Chief Executive Officer of the Company and the Managing Member of the Manager, conflicts of interest
may arise when negotiating the terms of engagement of the Manager or in the purchase of real estate. While Mr. Napolitano will
act with the best interest of the shareholders of the Company in mind, there is no assurance that such terms will be mutually
beneficial. Furthermore, Shaun Quin is the President of the Company and the Manager. Therefore, conflicts of interest may arise
when negotiating the terms of engagement of the Manager or in the purchase of real estate. While Mr. Quin will act with the best
interest of the shareholders of the Company in mind, there is no assurance that such terms will be mutually beneficial.
General
Execution.
The
Company’s success depends on the Managers ability to implement its investment strategy. Any factor that would
make it more difficult for the Manager to execute timely transactions may be detrimental to the Company’s strategy. No assurance
can be given that the investment strategies to be used by the Company and/or the Manager will be successful under all or any market conditions.
Delays
in or Failure to Close.
Generally,
any delay purchasing an asset or assets or failure to close on such assets may cause a delay in or failure to operate. Such failure
or delay may be caused by (but is not limited to), for example, the following events: force majeure, acts of terrorism, municipality
moratoriums and/or delays in approvals, labor or material shortages, or acts of war or conflict.
Lack
of Diversification & Risk Management.
Although
the Manager will attempt to structure the Company’s portfolio so that investments (both individually and in the aggregate)
have desirable risk/reward characteristics for the Company and are completed at an arm’s length basis, the Company may have
a non-diversified portfolio as a result of large amounts of Company’s capital invested in assets of the same general type and
character. Risk management is a fundamental principle in the development of the Company’s portfolio of assets and in the
management of each investment. Diversification of the Company’s portfolio by investment size and location is critical in
our attempt to manage portfolio-level risk. Such lack of diversification substantially increases market risks and the risk of
loss associated with an investment in the Company.
Funding
Risk.
Certain
of the Company’s investment assets may, from time to time, require additional funding in relation to closing on or development
of their underlying assets. As such, such entity may not have commitments for funding from any other source that will be sufficient
to complete any such development of the property. If such entity is unable to locate such additional commitments for other sources
of funding, the Fund may be unable to infuse additional loans into the entity and that could adversely affect such entity’s
ability to operate, which would significantly harm the Company’s revenues and financial condition.
Borrowing
Policy.
The
Company may use leverage. Our target leverage level on the entire portfolio is approximately 50% to 70%. Note, however that in
the early stages of the Company, the Manager may deem it necessary to utilize leverage to a greater degree in order to acquire
a greater number of properties with the cash available in order to achieve greater diversification sooner. The Company expects
to reduce that level of leverage over time by using funds from future offerings of the Company’s shares to either pay down
the borrowings or acquire additional properties for cash. There is no guarantee that the Company will be able to pay down these
borrowings in the future and will be subject to any and all risks associated with over leverage. There is no limitation on the
amount the Company borrows against any single property or against the portfolio or properties as a whole.
General
Risks of the Real Estate Industry.
The
ownership of real estate includes many risks including: declines in the value of real estate, general and local economic conditions,
unavailability of mortgage funds, overbuilding, extended vacancies of properties, increased competition, increases in property
taxes and operating expenses, changes in zoning laws, losses due to costs of cleaning up environmental problems, liability to
third parties for damages resulting from environmental problems, casualty or condemnation losses, limitations on rents, changes
in neighborhood values and the appeal of properties to tenants, changes in interest rates. An economic downturn could have a material
adverse effect on the real estate markets, which in turn could result in the Company not achieving its investment objectives.
Real property investments are subject to varying degrees of risk. The yields available from investments in real estate depend
on the amount of income and capital appreciation generated by the related properties. Income and real estate values may also be
adversely affected by such factors as applicable laws (e.g., the ADA and tax laws), interest rate levels and the availability
of financing. If the properties do not generate sufficient income to meet operating expenses, including, where applicable, debt
service, ground lease payments, tenant improvements, third-party leasing commissions and other capital expenditures, the income
and ability of the Company to make payments of any interest and principal on its indebtedness, if any, and its ability to make
distributions, will be adversely affected. In addition, real property may be subject to defaults by tenants.
The
performance of the economy in the region in which the commercial properties being acquired by the entities in which the Company
has its investments are located affects occupancy, market rental rates and expenses and, consequently, has an impact on the underlying
value of such properties. The financial results of major local employers also may have an impact on the cash flow and value of
certain properties.
Company
will have risks associated with land improvements and/ or construction.
The
cost of certain improvements and/or construction on properties acquired by the Company and the time it takes to do so may be affected
by factors beyond the control of the Company, including, but not limited to, worker strikes and other labor difficulties resulting
in the interruption or slow-down of improvements or construction; energy shortages; material and labor shortages; inflation; adverse
weather conditions; subcontractor defaults and delays; changes in federal, state or local laws, ordinances or regulations; acts
of God (which may result in uninsured losses); terrorist attacks; acts of war; and other unknown contingencies. The Company may
be required to engage substitute or additional contractors to complete any improvements or construction on properties in the event
of delays or cost overruns. If cost overruns resulting from delays or other causes are experienced in any construction, the Company
may have to seek additional debt financing. Further, delays in the completion of any improvements or construction could adversely
affect the ability of the Company to meet the debt service obligations burdening the properties. Payment of cost overruns could
impair the operational profitability of properties owned by the Company. The inability to complete any improvements or construction
on terms economically feasible to the Company may result in the sale of the property at a loss and a dissolution of the Company.
Such dissolution may result in the Company not having the ability to repay its debt obligations. One or more of such occurrences
may have an adverse effect on the Company.
Company
will make purchases with limited representations and warranties.
Properties
will likely often be acquired by the Company with limited representations and warranties from the seller regarding condition,
the presence of hazardous substances, the status of governmental approvals and entitlements and other significant matters affecting
the use, ownership and enjoyment of the property. As a result, if defects or other matters adversely affecting the property are
discovered, the acquiring Company may not be able to pursue a claim for damages against the seller. The extent of damages that
the Company may incur as a result of such matters cannot be predicted, but potentially could significantly adversely affect the
value of the property and/or the collateral pledged by the Company. Such factors may have an adverse effect on the Company.
Properties
purchased by the Company may contain toxic and hazardous materials; Company will likely have no environmental indemnity.
Federal,
state and local laws impose liability on a landowner for releases or the otherwise improper presence on the premises of hazardous
substances. This liability is without regard to fault for, or knowledge of, the presence of such substances. A landowner may be
held liable for hazardous materials brought onto the property before it acquired title and for hazardous materials that are not
discovered until after it sells the property. Similar liability may occur under applicable state law. Often times the seller of
a property will make only limited representations as to the absence of hazardous substances. If any hazardous materials are found
within the property in violation of law at any time, the Company may become jointly and severally liable for all cleanup costs,
fines, penalties and other costs. This potential liability will continue after the Company sells the property and may apply to
hazardous materials present before the Company acquired the property. If losses arise from hazardous substance contamination which
cannot be recovered from a responsible party, the financial viability of the Company may be substantially affected which would
in turn seriously compromise the Company’s. In extreme cases, a given property may be rendered worthless, or worse, where
the Company becomes obligated to pay cleanup costs, in excess of the value of the property. For shareholders, hazardous substance
contamination of properties acquired by Company could adversely affect the Company. In extreme cases, the entire investment would
need to be written off as a total loss.
Company
may have environmental liability.
Rarely
will the Company be required to complete a Phase I Environmental Site Assessment of a given property. While the Company itself
may at times require the seller of a given property to conduct such an assessment, any environmental hazards increase the risk
of environmental liability with respect to the Company’s acquisition of a property which could in turn adversely affect
the Company.
Company
face uncertain improvement and development costs and projections.
Any
financial projections or calculations respecting a given property will not be subjected to independent review nor will the it
require an independent assessment of such projections prior to the Company’s acquisition of a given property. Consequently,
the actual improvement or development costs of a property may be materially different from those originally anticipated. A property
may also require repairs, improvements, and other capital expenditures that are unknown to the Company. Such additional costs
and expenses may have a significant impact on the value of a property and may result in the Company’s inability to satisfy
its loans or obligations. One or more of such occurrences may have an adverse effect on the Company.
We
may be subject to uninsured losses.
The
Company will attempt to maintain adequate insurance coverage against liability for personal injury and property damage for the
properties acquired by such Company. However, there can be no assurance that insurance will be sufficient to fully cover such
liabilities. Furthermore, insurance against certain risks, such as earthquakes, floods, terrorism, etc., may be unavailable or
available only at unacceptable costs or in amounts that are less than the full market value or replacement cost of such properties.
In addition, there can be no assurance that particular risks which are currently insurable will continue to be insurable on an
economical basis or that current levels of coverage will continue to be available. If a loss occurs in connection with a property
that is partially or completely uninsured, the Company holding the property may not be able to complete its intended objectives
and may be unable to liquidate the property in an amount satisfactory to satisfy any loans or obligations burdening the property
or the Company’s other assets, if any. One or more such occurrences may have an adverse effect on the Company.
Our
collateral may be threatened by environmental and regulatory proceedings.
The
value of a property acquired by the Company may be adversely affected by legislative, regulatory, administrative and enforcement
actions at the local, state and national levels in the areas, among others, of environmental controls. In addition to possible
increasingly restrictive zoning regulations and related land use controls, such restrictions may relate to air and water quality
standards, noise pollution and indirect environmental impacts such as increased motor vehicle activity. Any one of these factors
could diminish the Company’s estimated equity in the property. If such the Company is unable to rectify adversary proceedings
in this context, the risk of default would be heightened and could have an adverse effect on the Company.
Company
face risks of zoning / eminent domain.
Real
property and the planned development thereof is subject to zoning changes by municipal and/or county authorities. A change in
a property’s expected final zoning designation may materially impact the Company’s ability to achieve its objectives
and satisfy its loan obligations. Also, all real property is further subject to the government’s power of eminent domain.
The “taking” or condemnation of a given property by city, county, state, or federal government authorities, and the
value of the property derived through such proceedings, could eliminate the anticipated income or profits of the Company and may
result in a full or partial default on any mortgages, loans or obligations of the Company. One or more such occurrences may have
an adverse effect on the Company.
Company
may face risks of investing in rental property.
On
occasion, the Company may purchase an existing residential or commercial rental property. The rental of units in residential apartment
buildings or leasing space in commercial buildings is a highly competitive business. Residential real estate is subject to adverse
housing pattern changes and uses, increased real estate taxes, vandalism (with attendant security costs), vacancies, rent contracts,
and rising operating costs. Problems can result from improper management and the inability of tenants to pay rents. Commercial
properties are subject to the same risks. Should the Company retain and operate such a property, the Company would be competing
with other properties to attract new tenants and subsequently may decrease rental or lease rates. Moreover, the Company’s
decision to retain and operate such a property could be adversely affected by periodic overbuilding of competitive properties
in its real estate market, which could affect the ultimate value of the property in the event it is sold in the future. The Company’s
success in this case, therefore, would depend in part upon the ability of the Company to retain a property manager with skills
adequate enough (i) to attract quality tenants to achieve significant occupancy levels of favorable rental rates, and (ii) to
provide an attractive and comfortable living environment for the tenants. The ability of the Company and its property manager
to attract tenants as well as to increase rental rates once tenants are attracted, will depend on factors beyond the control of
the Company, including the size and quality of competing properties, general and local economic conditions, competing rental rates,
the success and viability of the prospective tenants and renewals of existing leases. The inability to maintain a high occupancy
rate and favorable rental rates would adversely affect the income of the Company and value of the property. Although the Company
will be required to obtain insurance to cover casualty losses and general liability, ordinarily no other insurance will likely
be available to cover losses from ongoing operations. The occurrence of a casualty resulting in damage to such a property could
decrease or interrupt the payment of tenant rentals (See “Uninsured Losses”). Typical tenant leases allow tenants
to terminate their leases if the leased premises they occupy are partially or completely damaged or destroyed by fire or other
casualty unless such premises are restored to the extent of insurance proceeds received by the property owner. Such leases typically
also permit the tenants to partially or completely abate rental payments during the time needed to rebuild or restore such damaged
premises. Such leases also typically contain provisions which, under certain circumstances, permit tenants to assign their leases
or sublet the premises they occupy. Tenants generally would be able to assign or sublet leased premises with the prior written
consent of the property owner, which may not be unreasonably withheld. In the event of an adverse effect on the income of such
a property, the Company may find it necessary to obtain additional funds through additional borrowings, if available, subject
to the limitations on borrowing set forth herein. If additional funds are not available from any source, the Company would be
forced to either dispose of all or a portion of the property on unfavorable terms. Considering all of the above factors, this
could have an adverse impact on the Company.
Risks associated with the Company
may adversely affect the value of debt instruments issued in connection with an Investment Loan.
Because any
notes, deeds of trust, etc., issued by the Company will be linked to the overall financial health and stability of such Company
in addition to assets designated as collateral to secure an Investment Loan (real property, equity in the Company, etc.), any
adverse event affecting such stability may adversely affect their ability to repay indebtedness. This in turn may have a material
adverse impact on the Company.
We
may not be able to obtain adequate proof of title insurance.
Because
private money is typically used to purchase assets at auctions, the purchaser may be unable to secure adequate title insurance.
Thus, we may become subject to the risks associated with clouded title. This in turn may have a material adverse impact on the
Company.
Government
Regulation of Real Estate Business.
The
real estate business is subject to extensive building and zoning regulations by various federal, state and municipal authorities,
which affect land acquisition, development and construction activities, and certain dealings with customers, as well as consumer
credit and consumer protection statutes and regulations. Real estate operators are required to obtain approval from various governmental
authorities for its development activities, and new laws or regulations could be adopted, enforced or interpreted in a manner
that could delay a related entity’s ability to close on a property, which could, in turn, adversely affect the investments
of the Company. Development activities are also subject to risks relating to the inability to obtain, or delays in obtaining all
necessary zoning, environmental, land-use, development, building, occupancy and other required governmental permits and authorizations.
There is no assurance that regulations affecting the real estate industry, including environmental regulations, will not change
in a manner which could have a material adverse effect on the Company’s investments.
Limitations
on the Manager’s Liability and Indemnification.
To
the fullest extent permitted by law, the Company, in its sole discretion, shall indemnify and hold harmless the Manager and its
affiliates and the legal representatives of any of them (an “Indemnified Party”), from and against any loss, liability,
damage, cost or expense suffered or sustained by an Indemnified Party by reason of (i) any acts, omissions or alleged acts or
omissions arising out of or in connection with the Company, or any investment made or held by the Company (including, without
limitation, any judgment, award, settlement, reasonable attorneys’ fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding, or claim), provided that such acts, omissions or alleged acts
or omission upon which such actual or threatened action, proceeding or claim are based are not found by a court of competent jurisdiction
upon entry of a final non- appealable judgment to have been made in bad faith or to constitute fraud, willful misconduct or gross
negligence by such Indemnified Party, or (ii) any acts or omissions, or alleged acts or omissions, of any broker or agent of any
Indemnified Party, provided that such broker or agent was selected, engaged or retained by the Indemnified Party in accordance
with reasonable care.
The
Company has limited resources and there is significant competition for acquisitions. Therefore, the Company may not be able to
enter into or consummate an attractive acquisition.
The
Company expects to encounter intense competition from other entities having a business objective similar to the Company’s. Many
of these entities are well established and have extensive experience in identifying and effecting acquisitions directly or through
affiliates. Many of these competitors possess greater technical, human and other resources than the Company does and the Company’s
financial resources are limited when contrasted with those of many of these competitors. While the Company believes that there
are numerous potential targets that it could acquire, the Company’s ability to compete in acquiring certain sizable targets will
be limited by the Company’s limited financial resources and the fact that the Company may use its common stock to acquire an operating
business. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.
The
Company may be unable to obtain additional financing, if required, to complete an acquisition or to sustain the target(s), which
could compel the Company to restructure a potential business transaction or abandon a particular acquisition.
We
may be required to seek additional financing. We cannot assure you that such financing would be available on acceptable terms,
if at all. If additional financing proves to be unavailable, we would be compelled to restructure the transaction or abandon that
particular acquisition and seek an alternative target(s). In addition, if we consummate an acquisition, we may require additional
financing to sustain the target. The failure to secure additional financing could have a material adverse effect on the Company.
Financing
requirements to fund operations associated with reporting obligations under the Exchange Act.
The
Company has no revenues and is dependent upon the willingness of the Company’s Management to fund the costs associated with the
reporting obligations under the Exchange Act, other administrative costs associated with the Company’s corporate existence
and expenses related to the Company’s business objective. The Company is not likely to generate any revenues until the consummation
of an acquisition, at the earliest. The Company believes that it will have available sufficient financial resources available
from its Management to continue to pay accounting and other professional fees and other miscellaneous expenses that may be required
until the Company commences business operations following an acquisition.
We
are dependent upon interim funding provided by Management or an affiliated party to pay professional fees and expenses. Our Management
has provided funding, without formal agreement, as has been required to pay for accounting fees and other administrative expenses
of the Company.
The
Company does not currently engage in any business activities that provide cash flow. The costs of investigating and analyzing
potential acquisition candidates and preparing and filing Exchange Act reports for what may be an unlimited period of time will
be paid by our sole officer and director, or an affiliated party notwithstanding the fact that there is no written agreement to
pay such costs. Mr. Napolitano and/or an affiliated party have informally agreed to pay the Company’s expenses in the form of
advances that are unsecured, non-interest bearing. The Company intends to repay these advances when it has the cash resources
to do so.
Based
on Mr. Napolitano’s resource commitment to fund our operations, we believe that we will be able to continue as a going concern
until such time as we conclude an acquisition. During the next 12 months we anticipate incurring costs related to:
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filing
of Exchange Act reports.
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franchise
fees, registered agent fees, legal fees and accounting fees, and
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investigating,
analyzing and consummating an acquisition or acquisition(s).
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We
estimate that these costs will range from five to six thousand dollars per year, and that we will be able to meet these costs
as necessary through loans/advances from Management or affiliated parties until we enter into an acquisition.
The
Company’s sole officer and director has a 99% voting interest in the Company and thus is in a position to influence certain actions
requiring stockholder vote.
Management
has no present intention to call for an annual meeting of stockholders to elect new directors prior to the consummation of an
acquisition. As a result, our current director will continue in office at least until the consummation of the acquisition. If
there is an annual meeting of stockholders for any reason, the Company’s Management has broad discretion regarding proposals submitted
to a vote by shareholders as a consequence of Management’s significant equity interest. Accordingly, the Company’s Management
will continue to exert substantial control at least until the consummation of an acquisition.
Broad
discretion of Management
Any
person who invests in the Company’s common stock will do so without an opportunity to evaluate the specific merits or risks of
any prospective acquisition. As a result, investors will be entirely dependent on the broad discretion and judgment of Management
in connection with the selection of a prospective acquisition. There can be no assurance that determinations made by the Company’s
Management will permit us to achieve the Company’s business objectives.
Reporting
requirements may delay or preclude an acquisition
Pursuant
to the requirements of Section 13 of the Exchange Act, the Company is required to provide certain information about significant
acquisitions and other material events. The Company will continue to be required to file quarterly reports on Form 10-Q and annual
reports on Form 10-K, which annual report must contain the Company’s audited financial statements. As a reporting company under
the Exchange Act, following any acquisition, we will be required to file a report on Form 8-K.
If
the Company is deemed to be an investment company, the Company may be required to institute burdensome compliance requirements
and the Company’s activities may be restricted, which may make it difficult for the Company to enter into an acquisition.
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restrictions
on the nature of the Company’s investments; and
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restrictions
on the issuance of securities, which may make it difficult for us to complete an acquisition.
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In
addition, we may have imposed upon us burdensome requirements, including:
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registration
as an investment company;
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adoption
of a specific form of corporate structure; and
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reporting,
record keeping, voting, proxy and disclosure requirements and other rules and regulations.
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The
Company does not believe that its anticipated principal activities will subject it to the Investment Company Act of 1940.
The
Company has no “Independent Director”, so actions taken and expenses incurred by our officer and director on behalf
of the Company will generally not be subject to “Independent Review”.
Although
no compensation will be paid to our director for services rendered prior to or in connection with an acquisition, he may receive
reimbursement for out-of-pocket expenses incurred by him in connection with activities on the Company’s behalf such as identifying
potential targets and performing due diligence on suitable acquisitions. There is no limit on the amount of these out-of-pocket
expenses and there will be no review of the reasonableness of the expenses by anyone other than our board of director, which consist
of two directors who may seek reimbursement. If our directors will not be deemed “independent,” they will generally
not have the benefit of independent director examining the propriety of expenses incurred on our behalf and subject to reimbursement.
Although the Company believes that all actions taken by our directors on the Company’s behalf will be in the Company’s best interests,
the Company cannot assure the investor that this will actually be the case. If actions are taken, or expenses are incurred that
are actually not in the Company’s best interests, it could have a material adverse effect on our business and plan of operation
and the price of our stock held by the public stockholders.
General
Economic Risks.
The
Company’s current and future business objectives and plan of operation are likely dependent, in large part, on the state of the
general economy. Adverse changes in economic conditions may adversely affect the Company’s business objective and plan of operation.
These conditions and other factors beyond the Company’s control include also, but are not limited to regulatory changes.
Risks
Related to Our Common Stock
The
Company’s shares of common stock are traded from time to time on the OTC Pink Sheet Market.
Our
common stock is traded on the OTC Pink Sheet Market from time to time. There can be no assurance that there will be a liquid trading
market for the Company’s common stock following an acquisition. In the event that a liquid trading market commences, there can
be no assurance as to the market price of the Company’s shares of common stock, whether any trading market will provide liquidity
to investors, or whether any trading market will be sustained.
Our common stock is subject to the Penny Stock Rules of
the SEC and the trading market in our common stock is limited, which makes transactions in our stock cumbersome and may reduce
the value of an investment in our common stock.
The Securities and Exchange Commission
has adopted Rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 require:
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that a broker or dealer approve a person’s account for
transactions in penny stocks; and
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the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
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In order to approve a person’s account for transactions
in penny stocks, the broker or dealer must:
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obtain financial information and investment experience
objectives of the person; and
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make a reasonable determination that the transactions in
penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable
of evaluating the risks of transactions in penny stocks.
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The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which,
in highlight form:
|
|
●
|
sets forth the basis on which the broker or dealer made
the suitability determination; and
|
|
|
●
|
that the broker or dealer received a signed, written agreement
from the investor prior to the transaction.
|
Generally, brokers may be less willing
to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the
risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both
the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available
to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price
information for the penny stock held in the account and information on the limited market in penny stocks.
State blue sky registration; potential
limitations on resale of the Company’s common stock
The holders of the Company’s shares of
common stock registered under the Exchange Act and those persons who desire to purchase them in any trading market that may develop
in the future, should be aware that there may be state blue-sky law restrictions upon the ability of investors to resell the Company’s
securities. Accordingly, investors should consider the secondary market for the Company’s securities to be a limited one.
It is the intention of the Company’s Management
following the consummation of a acquisition to seek coverage and publication of information regarding the Company in an accepted
publication manual which permits a manual exemption. The manual exemption permits a security to be distributed in a particular
state without being registered if the Company issuing the security has a listing for that security in a securities manual recognized
by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1)
the names of issuers, officers, and directors, (2) an issuer’s balance sheet, and (3) a profit and loss statement for either the
fiscal year preceding the balance sheet or for the most recent fiscal year of operations. Furthermore, the manual exemption is
a non-issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those
published by Standard and Poor’s, Moody’s Investor Service, Fitch’s Investment Service, and Best’s Insurance Reports, and many
states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals”
but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize
the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.
Rule 144 Related Risks
The SEC adopted amendments to Rule 144
which became effective on February 15, 2008. These Rule 144 amendments apply to securities acquired both before and after
that date. Generally, under the Rule 144 amendments, a person who has beneficially owned restricted shares for at least six months
would be entitled to sell their securities provided that: (i) such person is not deemed to have been an affiliate at the time
of, or at any time during the three months preceding, a sale; (ii) we are subject to and are current in the Exchange Act periodic
reporting requirements for at least 90 days before the sale; and (iii) if the sale occurs prior to satisfaction of a
one-year holding period, provided current information is available at the time of sale.
Persons who have beneficially owned restricted
shares for at least six months but who are affiliates at the time of, or at any time during the three months preceding a sale,
would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only
a number of securities that does not exceed the greater of either of the following: (i) 1% of the total number of securities of
the same class then outstanding; or (ii) the average weekly trading volume of such securities during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to the sale; provided, in each case, that we are subject to the Exchange Act
periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner
of sale, current public information and notice provisions of Rule 144.
These Rule 144 related risks are subject
to further restrictions in the event that the Exchange Act reporting company is deemed to be a Shell Company.
Restrictions on the Reliance of Rule 144 by Shell
Companies or Former Shell Companies
Historically, the SEC staff has taken the
position that Rule 144 is not available for the resale of securities initially issued by companies that are, or previously
were, blank check companies, like us. The SEC has codified and expanded this position in the amendments discussed above by prohibiting
the use of Rule 144 for resale of securities issued by any shell companies (other than acquisition related shell companies)
or any issuer that has been at any time previously a shell company. The SEC has provided an important exception to this prohibition,
however, if the following conditions are met:
|
|
-
|
The issuer of the securities that was formerly a shell
company has ceased to be a shell company;
|
|
|
-
|
The issuer of the securities is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act;
|
|
|
-
|
The issuer of the securities has filed all Exchange Act
reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer
was required to file such reports and materials), other than Current Reports on Form 8-K; and
|
|
|
-
|
At least one year has elapsed from the time that the issuer
filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company.
|
As a result, it is likely that pursuant
to Rule 144, stockholders who receive our restricted securities in a acquisition will not be able to sell our shares without
registration until one year after we have completed our initial acquisition.
Rule 145 Related Risk
Under the new amendments, affiliates of
a target company who receive registered shares in a Rule 145 acquisition transaction, and who do not become affiliates of the acquirer,
will be able to immediately resell the securities received by them into the public markets without registration (except for affiliates
of a shell company as discussed in the following section). However, those persons who are affiliates of the acquirer, and those
who become affiliates of the acquirer after the acquisition, will still be subject to the Rule 144 resale conditions generally
applicable to affiliates, including the adequate current public information requirement, volume limitations, manner-of-sale requirements
for equity securities, and, if applicable, a Form 144 filing.
Possible Issuance of Additional Securities.
Our Articles of Incorporation authorize
the issuance of 500,000,000 shares of common stock, par value $0.001. As of December 31, 2019, we had 19,645,818 shares issued
and outstanding. We may be expected to issue additional shares in connection with our pursuit of real estate acquisitions. To
the extent that additional shares of common stock are issued, our shareholders would experience dilution of their respective ownership
interests. If we issue shares of common stock in connection with our intent to pursue new business opportunities, a change in
control of the Company may be expected to occur. The issuance of additional shares of common stock may adversely affect the market
price of our common stock, in the event that a more active trading market commences.
Dividends unlikely
The Company does not expect to pay dividends
for the foreseeable future because it has no revenues or cash resources. The payment of dividends will be contingent upon the Company’s
future revenues and earnings, if any, capital requirements and overall financial conditions. The payment of any future dividends
will be within the discretion of the Company’s board of directors as then constituted. It is the Company’s expectation that future
Management following a acquisition will determine to retain any earnings for use in its business operations and accordingly, the
Company does not anticipate declaring any dividends in the foreseeable future.
Remainder of Page Intentionally Left Blank
ITEM 2. FINANCIAL INFORMATION
Management’s Plan of Operation
The following discussion contains forward-looking
statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements
by the fact that they do not relate strictly to historical or current facts. They use of words such as “anticipate”,
“estimate”, “expect”, “project”, “intend”, “plan”, “believe”, and other
words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to
time, we also may provide forward-looking statements in other materials we release to the public.
Overview
The Company’s current business objective
is to invest in a diversified portfolio of quality commercial real estate properties and other real estate investments located
throughout the United States and Puerto Rico. The Company intends to have a dual investment strategy. The majority of the portfolio
will be invested in what the company considers its Core Holdings. The objective for these core holdings is to own stabilized, fully
leased, secure real estate assets that provide durable, predictable cash flow to the Company. A smaller percentage of the portfolio
will be invested in what the Company classifies as Value-Add & Opportunistic Real Estate. These investments may include development
or redevelopment projects, repositioning of an asset and could include making physical improvements to a property that will allow
for higher rents and increased occupancy rates. We intend to use the Company’s limited personnel and financial resources in connection
with such activities. The Company will utilize its capital stock, debt or a combination of capital stock and debt, in effecting
a acquisition. It may be expected that entering into an acquisition will involve the issuance of restricted shares of capital stock.
The issuance of additional shares of our capital stock:
|
|
●
|
may significantly reduce the equity interest of our stockholders;
|
|
|
●
|
could cause a change in control if a substantial number
of our shares of capital stock are issued; and
|
|
|
●
|
may adversely affect the prevailing market price for our
common stock.
|
Similarly, if we issued debt securities,
it could result in:
|
|
●
|
default and foreclosure on our assets if our operating
revenues were insufficient to pay our debt obligations;
|
|
|
●
|
acceleration of our obligations to repay the indebtedness
even if we have made all principal and interest payments when due if the debt security contained covenants that required the maintenance
of certain financial ratios or reserves and any such covenants were breached without a waiver or renegotiations of such covenants;
|
|
|
●
|
our immediate payment of all principal and accrued interest,
if any, if the debt security was payable on demand; and
|
|
|
●
|
our inability to obtain additional financing, if necessary,
if the debt security contained covenants restricting our ability to obtain additional financing while such security was outstanding.
|
Results of Operations during the year ended December 31,
2018 as compared to the year ended December 31, 2017
We have not generated any revenues during
the years 2018 and 2017. We had total operating expenses of $22,495 during the year ended December 31, 2018 and $nil during the
year ended December 31, 2017. Operating expenses consisted mainly of legal, accounting, transfer agent and registration fees associated
with getting the Company back in good standing with Nevada state and OTC market authorities. We incurred $2,838 in interest income
during the year ended December 31, 2018 and $nil during the year ended December 31, 2017. During the year ended December 31, 2018
we had a net loss of $19,657 and $nil in 2017.
Results of Operations during the period ended September 30,
2019 as compared to the period ended September 30, 2018
Revenue
In August 2018 we commenced operations
in our first cryptocurrency mining location as part of the RLT Atwood acquisition. Our cryptocurrency mining revenues increased
to $41,890 during the nine-month period ended September 30, 2019 from $0 in the nine month period ended September 30, 2018. The
increase resulted primarily from the results of operating during the months of starting August 2019 and September 2019. This increase
in revenues was partially offset, however, by lower revenues resulting from an overall decrease in the market price of digital
currencies.
Cost of Revenues
Cost of revenues was $64,368 in the nine
months ended September 30, 2019 compared to $0 in the nine months ended September 30, 2018. Expenses associated with running our
cryptocurrency mining operations, such as storage costs and managed hashrate services are recorded as cost of revenues. We experienced
a gross loss on revenues in the current fiscal year primarily due to high utility costs, costs of vacating and relocating operations.
Expenses
General and administration expenses for
the year ended December 31, 2018, amounted to $1,081,602, compared to $0 during
General and administration expenses for
the nine months ended September 30, 2019, amounted to $37,038, compared to $0 during the nine months ended September 30, 2018.
The increase is primarily attributable to increased administrative costs associated with beginning our cryptocurrency mining operation,
as well as state registration costs for the establishment of FAVO Blockchain and OTC market registration fees as well as travel
expenses.
Professional fees for the nine months ended
September 30, 2019, amounted to $83,741 compared to $3,600 during the nine months ended September 30, 2018. The increase in professional
fees is due to increased legal, accounting, filing and transfer agent fees associated with the establishment of FAVO Blockchain,
Inc. as well as maintaining our registration status with OTC Markets. In addition, we incurred additional costs associated with
establishing a new office location, and website.
Other Loss
Other loss increased by $548,683 during
the nine months ended September 30, 2019, compared to $nil during the nine months ended September 30, 2018. The increase in Other
loss is due to a loss incurred on the sale of our cryptocurrency mining equipment to Hydro66 for a loss of $545,117. This was further
increased by $3,566 in unrealized losses incurred on cryptocurrencies acquired as part of the RLT Atwood acquisition.
Net Loss
For the nine months ended September 30,
2019, we incurred a net loss of $691,940, compared to a net loss of $3,600 for the nine months ended September 30, 2018. The increase
is due to increased administrative costs associated with beginning our cryptocurrency mining operation, as well as state registration
costs for the establishment of FAVO Blockchain and OTC market registration fees as well as travel expenses. In addition, there
were increased legal, accounting, filing and transfer agent fees associated with the establishment of FAVO Blockchain, Inc. as
well as maintaining our registration status with OTC Markets. In addition, we incurred additional costs associated with establishing
a new office location, and website
Liquidity and Capital Resources
As of December 31, 2018, the Company has
no business operations and no cash resources other than that provided by Management. We are dependent upon interim funding provided
by Management or an affiliated party to pay professional fees and expenses. Our Management and an affiliated party have agreed
to provide funding as may be required to pay for accounting fees and other administrative expenses of the Company until the Company
enters into a acquisition. The Company would be unable to continue as a going concern without interim financing provided by Management.
As of December 31, 2018, we had $0 in cash. As of December 31, 2017, we had $0 in cash.
As of September 30, 2019, the Company had
$940 of digital currencies held and $3,690,598 of goodwill all associated with the RLT Atwood acquisition. The company has not
established a bank and our expenses are still supporting by funding provided by Management.
If we require additional financing, we
cannot predict whether equity or debt financing will become available at terms acceptable to us, if at all. The Company depends
upon services provided by Management and an affiliated party to fulfill its filing obligations under the Exchange Act. At present,
the Company has no financial resources to pay for such services.
The Company does not currently engage in
any business activities that provide cash flow. The costs of investigating and analyzing acquisitions, maintaining the filing of
Exchange Act reports, the investigation, analyzing, and consummation of an acquisition for an unlimited period of time will be
paid from additional money contributed by Vincent Napolitano, our sole officer and director, or an affiliated party.
During the next 12 months we anticipate
incurring costs related to:
|
Category
|
|
Estimated Expenses for the Year
|
|
|
|
|
|
|
|
Advertising & Marketing
|
|
$
|
40,000
|
|
|
Website Design
|
|
$
|
12,000
|
|
|
Accounting, Auditing & Legal
|
|
$
|
40,000
|
|
|
General & Administrative and Due Diligence
|
|
$
|
30,000
|
|
|
Working Capital
|
|
$
|
20,000
|
|
|
Rent
|
|
$
|
48,000
|
|
|
TOTAL
|
|
$
|
190,000
|
|
|
|
●
|
filing of Exchange Act reports.
|
|
|
●
|
franchise fees, registered agent fees, legal fees and accounting
fees, and
|
|
|
●
|
investigating, analyzing and consummating an acquisition
or acquisitions.
|
We estimate that these costs will be in
the range of $40,000 per year, and that we will be able to meet these costs as necessary, to be advanced/loaned to us by Management
and/or an affiliated party.
On December 31, 2018 and December 31, 2017,
we have had $nil in current assets and $nil in current assets, respectively. As of December 31, 2018, we had $19,102 in liabilities
and stockholders’ deficit, consisting of amounts due to related party. As of December 31, 2017, we had $39,812 in liabilities.
We had a negative cash flow from operations
of $18,102 during the year ended December 31, 2018. We financed our negative cash flow from operations during the year ended December
31, 2018 through advances made by Custodian Ventures, LLC.
We had $0 cash flow from operations during
the year ended December 31, 2018 and December 31, 2017.
On September 30, 2019 we had $0 in current
assets. As of September 30, 2019, we had $147,650 in liabilities and stockholders’ deficit, consisting of amounts due to
related party.
We had a negative cash flow from operations
of $0 during the nine months ended September 30, 2019. We financed our negative cash flow from operations during the nine months
ended September 30, 2019 through our CEO paying expenses on our behalf in the amount of $147,857.
The Company currently plans to satisfy
its cash requirements for the next 12 months through borrowings from its CEO or companies affiliated with its CEO and believes
it can satisfy its cash requirements so long as it is able to obtain financing from these affiliated parties. The Company expects
that money borrowed will be used during the next 12 months to satisfy the Company’s operating costs, professional fees and for
general corporate purposes. There is no written funding agreement between the Company and Mr. Napolitano, our sole officer and
director.
The Company has only limited capital. Additional
financing is necessary for the Company to continue as a going concern. Our independent auditors have unqualified audit opinion
for the years ended December 31, 2018 and 2017 with an explanatory paragraph on going concern.
Off-Balance Sheet Arrangements
As of September 30, 2019, December 31,
2018 and 2017, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated
under the Securities Act of 1934.
Contractual Obligations and Commitments
As of September 30, 2019, December 31,
2018 and 2017, we did not have any contractual obligations.
Critical Accounting Policies
Our significant accounting policies are
described in the notes to our financial statements for the nine months ended September 30, 2019 and 2018, and are included elsewhere
in this registration statement.
ITEM 3. DESCRIPTION OF PROPERTY
The Company’s corporate office is located
at 1461 Franklin Ave., 1st Floor South, Garden City, NY 11530, which space has been provided to us on a rent-free basis. The
Company is currently negotiating a sublease in the space and it is anticipated will cost approximately $4,000 per month
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information
regarding the beneficial ownership of our common stock and preferred stock as of December 31, 2019. The information in this table
provides the ownership information for: each person known by us to be the beneficial owner of more than 5% of our common stock;
each of our directors; each of our executive officers; and our executive officers and directors as a group.
Beneficial ownership has been determined
in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless
otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares
indicated as beneficially owned by them.
|
Name of Beneficial Owner
|
|
Common Stock Beneficially Owned (1)
|
|
|
Series
C Preferred Stock Beneficially Owned
|
|
|
Percentage of Common Stock Owned (1)
|
|
|
Percentage of Series C Preferred Stock Owned
|
|
|
Favo Group, LLC (2)
|
|
|
9,367,000
|
|
|
|
|
|
|
|
47.68
|
%
|
|
|
|
|
|
1461 Franklin Ave.,
1st Floor South
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garden City, NY 11530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vincent Napolitano
|
|
|
|
|
|
|
25,000,000
|
|
|
|
|
|
|
|
100
|
%
|
|
Favo Fund, LLC (3)
|
|
|
2,060,000
|
|
|
|
|
|
|
|
10.49
|
%
|
|
|
|
|
|
Director and Officer (2 persons)(4)
|
|
|
11,427,000
|
|
|
|
|
|
|
|
58.17
|
%
|
|
|
|
|
|
DMA Investments
|
|
|
1,312,222
|
|
|
|
|
|
|
|
6.67
|
%
|
|
|
|
|
|
|
(1)
|
Applicable percentage
ownership is based on 19,645,818 shares of common stock outstanding as of December 31,
2019. Beneficial ownership is determined in accordance with the rules of the Securities
and Exchange Commission and generally includes voting or investment power with respect
to securities. Shares of common stock that are currently exercisable or exercisable within
60 days of December 31, 2019 are deemed to be beneficially owned by the person holding
such securities for the purpose of computing the percentage of ownership of such person,
but are not treated as outstanding for the purpose of computing the percentage ownership
of any other person.
|
|
|
(2)
|
Vincent Napolitano is the managing member of Favo Group,
LLC, and has investment control. Mr. Napolitano owns 65% of Favo Group LLC.
|
|
|
(3)
|
FAVO Group is the managing member of Favo Fund, LLC, and
has sole investment control. Mr. Napolitano owns 65% of Favo Group LLC.
|
|
|
(4)
|
Vincent Napolitano
and Shaun Quin are the officers and directors of the Company. Vincent Napolitano owns
25,000,000 shares of Series C Preferred Stock, representing 100% of the preferred stock
outstanding.
|
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The following table sets forth the names and ages of the member
of our Board of Director and our executive officers and the positions held by each.
|
Name
|
|
Age
|
|
Title
|
|
Vincent Napolitano
|
|
47
|
|
CEO and Chairman
|
|
Shaun A. Quin
|
|
37
|
|
President
|
Vincent Napolitano, 47, has been CEO and
Chairman of the Company since December 12, 2018. Mr. Napolitano has over 25 years of Wall Street experience & entrepreneurial
insight. He also serves as Executive VP for Richmond Honan Development & Acquisitions, LLC. Mr. Vincent Napolitano is the CEO
of FAVO Group LLC, a 47.68% shareholder of the Company. Mr. Napolitano owns 65% of FAVO Group LLC. On Wall Street, he specialized
in REIT’s and related real estate products and served as Chief Investment Officer for multiple special purpose vehicles (SPV)
which acquire private stock in Pre-Initial Public Offerings (Pre-IPO) in unicorn companies such as Facebook & Twitter. Mr.
Napolitano also led banking teams which have raised over $250 Million in REIT related products and participated in financing several
billion dollars of real estate-related IPO’s. From 2002 through 2011, he was Founder& CEO of Garden City Capital Management
LLC & PNI Global Partners Inc., which operated as a significant independent OSJ for a national brokerage firm. Prior to that,
Mr. Napolitano spent several years as a Portfolio Manager of one of the largest family-owned hedge funds in NYC. Mr. Napolitano
holds an AAS In Hotel & Restaurant Management and holds Series 24, 62 & 63 designations.
Mr. Shaun Quin is President of FAVO Group
LLC, a 47.68% shareholder of the Company. Mr. Quinn owns 35% of FAVO Group LLC. Mr. Quinn is an officer and director of the Company.
Previously, Mr. Quin was the CEO of RLT Atwood International Limited (Share Code RLT), a publicly-traded company on the MERJ Stock
Exchange. RLT was the world’s first listed blockchain investment company and its assets were acquired by the Company. Mr.
Quin has 20 years of business experience & entrepreneurial insight. He is currently a Director, Partner & Investor in multiple
companies in various sectors including Property Management, Insurance, Wealth Management, Retail & Fintech. Mr. Quin has received
significant accolades in his career, including being presented with the Microsoft Worldwide Innovation Award In 2010 In Washington
DC by Microsoft’s CEO, Steve Ballmer. He also received the Young Manager of the Year Award for 2015, Most Improved Business
Award in 2015 & Business of the Year Award in 2016.
Mr. Napolitano was selected to serve as
a director due to his knowledge of the real estate market, his judgment in assessing properties and accompanying risks, and his
expertise with emerging growth companies. Mr. Quin was selected to serve as a director due to his knowledge of Global Capital Markets,
his judgment in assessing properties and his expertise with emerging growth companies.
Our director holds office until the next
annual meeting of stockholders and until his successors have been duly elected and qualified. There are no agreements with respect
to the election of directors. We do not compensate our directors. Officers are appointed annually by the Board of Directors and
each executive officer serves at the discretion of the Board of Directors. We do not have any standing committees at this time.
Our director, officer or affiliates have
not, within the past five years, filed any bankruptcy petition, been convicted in or been the subject of any pending criminal proceedings,
or is any such person the subject or any order, judgment or decree involving the violation of any state or federal securities laws.
Section 16(a) Compliance
Section 16(a) of the Securities and Exchange
Act of 1934 requires the Company’s directors and executive officers, and persons who own beneficially more than ten percent (10%)
of the Company’s Common Stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission.
Copies of all filed reports are required to be furnished to the Company pursuant to Section 16(a). Once the Company becomes subject
to the Exchange Act of 1934, our office and director has informed us that he intends to file reports required to be filed under
Section 16(a).
ITEM 6. EXECUTIVE COMPENSATION
No executive compensation was paid during
the fiscal years ended December 31, 2018 and 2017. The Company has no employment agreement with any of its officers and directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE
On October 19, 2018, the Company issued
473,350,000 shares of common stock, with par value $0.001 for par value payable in cash and a promissory note issued on that same
day for $464,150, to Custodian Ventures, LLC. The note matured in 180 days from issuance and accrued interest at the rate of 5%
per annum. The Company released Custodian Ventures, LLC from its obligations under such note as of the date of the change of control.
In addition, David Lazar thereafter, published all of the missing filings with OTC Markets for the Company, so that it became current
with Pink Sheets information. There was no party that requested such services.
On December 6, 2018, the Company issued
25,000,000 shares of super-voting shares of Series C Preferred Stock to Custodian Ventures, LLC in exchange for services rendered
to, and fees incurred by, the Company.
In the event the Company engages Manager,
all terms will be as disclosed herein, and will be done at arm’s length.
ITEM 8. LEGAL PROCEEDING
None.
ITEM 9. MARKET PRICE OF AND DIVIDENDS
ON THE COMPANY’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is currently quoted on
the OTC market “Pink Sheets” under the symbol FAVO. For the periods indicated, the following table sets forth the high
and low bid prices per share of common stock. The below prices represent inter-dealer quotations without retail markup, markdown,
or commission and may not necessarily represent actual transactions.
|
|
|
Price Range
|
|
|
Period
|
|
High
|
|
|
Low
|
|
|
Year ended December 31, 2019
|
|
$
|
1.00
|
|
|
$
|
0.36
|
|
|
First Quarter
|
|
$
|
1.00
|
|
|
$
|
0.202
|
|
|
Second Quarter
|
|
|
|
|
|
$
|
0.150
|
|
|
Third Quarter
|
|
$
|
0.528
|
|
|
$
|
0.1475
|
|
|
Fourth Quarter
|
|
$
|
0.33
|
|
|
$
|
0.0352
|
|
|
Year Ended December 31, 2018:
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
0.14
|
|
|
$
|
0.06
|
|
|
Second Quarter
|
|
$
|
0.14
|
|
|
$
|
0.06
|
|
|
Third Quarter
|
|
$
|
0.90
|
|
|
$
|
0.06
|
|
|
Fourth Quarter
|
|
$
|
1.96
|
|
|
$
|
0.22
|
|
As of December 3, 2019, our shares of common stock were held
by approximately 172 stockholders of record. The transfer agent of our common stock is ClearTrust, LLC. Phone (813) 235-4490.
Dividends
Holders of common stock are entitled to
dividends when, as, and if declared by the Board of Directors, out of funds legally available therefore. We have never declared
cash dividends on its common stock and our Board of Directors does not anticipate paying cash dividends in the foreseeable future
as it intends to retain future earnings to finance the growth of our businesses. There are no restrictions in our articles of incorporation
or bylaws that restrict us from declaring dividends.
Securities Authorized for Issuance Under Equity Compensation
Plans
No equity compensation plan or agreements
under which our common stock is authorized for issuance has been adopted during the fiscal years ended December 31, 2018 and 2017.
ITEM 10. RECENT SALES OF UNREGISTERED
SECURITIES
On October 19, 2018, the Company issued
473,350,000 shares of common stock, with par value $0.001 for par value payable in cash, services, and a promissory note issued
on that same day for $464,150, to Custodian Ventures, LLC.
On December 6, 2018, the Company issued
25,000,000 shares of super-voting shares of Series C Preferred Stock to Custodian Ventures, LLC in exchange for services rendered
to, and fees incurred by, the Company.
On April 6, 2019, the Company issued 9,646,628
shares of common stock of the Company to the shareholders of RLT for all of the assets of RLT, valued at $3,600,000.
Each issuance was completed pursuant
to Section 4(a)(2) of the Securities Act, as none of the above were public offerings. They were private transactions which raised
no funds for the Company.
ITEM 11. DESCRIPTION OF COMPANY’S SECURITIES
TO BE REGISTERED
The following statements relating to the
capital stock set forth the material terms of the Company’s securities; however, reference is made to the more detailed provisions
of our Certificate of Incorporation and by-laws, copies of which are filed herewith.
Common Stock
Our Certificate of Incorporation authorize
the issuance of 500,000,000 shares of common stock, par value $0.001. Our holders of shares of common stock are entitled to one
vote for each share on all matters to be voted on by the shareholders. Holders of common stock do not have cumulative voting rights.
Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the board of
directors in its discretion from legally available funds. In the event of a liquidation, dissolution or winding up of the Company,
the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Holders
of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights
or sinking fund provisions with respect to the common stock.
Dividends
Dividends, if any, will be contingent upon
our revenues and earnings, if any, capital requirements and financial conditions. The payment of dividends, if any, will be within
the discretion of our board of directors. We intend to retain earnings, if any, for use in our business operations and accordingly,
the board of directors does not anticipate declaring any dividends prior to an acquisition transaction, nor can there be any assurance
that any dividends will be paid following any acquisition.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our articles of incorporation, by-laws
and director indemnification agreements provide that each person who was or is made a party or is threatened to be made a party
to or is otherwise involved (including, without limitation, as a witness) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was a director or an officer of Brenham or, in the
case of a director, is or was serving at our request as a director, officer, or trustee of another corporation, or of a partnership,
joint venture, trust or other enterprise, including service with respect to an employee benefit plan, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer or trustee or in any other capacity while serving as
a director, officer or trustee, shall be indemnified and held harmless by us to the fullest extent authorized by the Nevada General
Corporation Law against all expense, liability and loss reasonably incurred or suffered by such.
Section 145 of the Nevada General Corporation
Law permits a corporation to indemnify any director or officer of the corporation against expenses (including attorney’s fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any action, suit or proceeding
brought by reason of the fact that such person is or was a director or officer of the corporation, if such person acted in good
faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and,
with respect to any criminal action or proceeding, if he or she had no reason to believe his or her conduct was unlawful. In a
derivative action, (i.e., one brought by or on behalf of the corporation), indemnification may be provided only for expenses actually
and reasonably incurred by any director or officer in connection with the defense or settlement of such an action or suit if such
person acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be provided if such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the court in which the action or suit was brought shall determine that the defendant is fairly
and reasonably entitled to indemnity for such expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the Nevada
General Corporation Law, Article Seven of our articles of incorporation eliminates the liability of a director to us for monetary
damages for such a breach of fiduciary duty as a director, except for liabilities arising:
|
|
●
|
from any breach of the director’s duty of loyalty to us;
|
|
|
●
|
from acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
|
|
|
●
|
under Section 174 of the Nevada General Corporation Law;
and
|
|
|
●
|
from any transaction from which the director derived an
improper personal benefit.
|
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered
Public Accounting Firm
To the shareholders and the board
of directors of Favo Realty, Inc.
Opinion on the Financial Statements
We have audited the accompanying
balance sheets of Favo Realty, Inc. (the "Company") as of December 31, 2018 and 2017, the related statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements
based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
Substantial Doubt about the Company’s
Ability to Continue as a Going Concern
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements,
the Company’s minimal activities raise substantial doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor
since 2018
Lakewood, CO
December 12, 2019
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FAVO REALTY, INC.
BALANCE SHEETS
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
1,250
|
|
|
|
17,749
|
|
|
Loan payable, related party
|
|
|
3,143
|
|
|
|
22,063
|
|
|
Total current liabilities
|
|
|
4,393
|
|
|
|
39,812
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Series C Preferred stock, par value $0.001 per share; 25,000,000 shares authorized; 25,000,000 outstanding
|
|
|
25,000
|
|
|
|
-
|
|
|
Common stock, par value $0.001 per share; 500,000,000 shares authorized; 9,999,190 shares issued and outstanding in 2018 and 2017, respectively
|
|
|
9,999
|
|
|
|
532
|
|
|
Additional paid in capital
|
|
|
179,930
|
|
|
|
26,077
|
|
|
Accumulated deficit
|
|
|
(219,322
|
)
|
|
|
(66,421
|
)
|
|
Total stockholders’ deficit
|
|
|
(4,393
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these financial statements.
FAVO REALTY, INC.
STATEMENTS OF OPERATIONS
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Related party consulting services paid in preferred shares
|
|
|
173,056
|
|
|
|
-
|
|
|
Legal fees
|
|
|
10,300
|
|
|
|
-
|
|
|
Audit and accounting fees
|
|
|
3,600
|
|
|
|
-
|
|
|
Transfer agent fees
|
|
|
5,781
|
|
|
|
|
|
|
Registration fees
|
|
|
2,735
|
|
|
|
-
|
|
|
Bank charges
|
|
|
79
|
|
|
|
|
|
|
Total operating expense
|
|
|
195,551
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(195,551
|
)
|
|
|
-
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,838
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(192,713
|
)
|
|
$
|
-
|
|
|
Net loss per common share – basic and diluted
|
|
$
|
(0.19
|
)
|
|
$
|
(0.00
|
)
|
|
Weighted average common shares outstanding – basic and diluted
|
|
|
1,005,537
|
|
|
|
532,187
|
|
The accompanying notes are an integral part
of these financial statements.
FAVO REALTY, INC.
STATEMENT OF STOCKHOLDERS’ (DEFICIT)
FOR THE PERIOD DECEMBER 31, 2018
AND DECEMBER 31, 2017
|
|
|
Common Stock:
|
|
|
Common Stock:
|
|
|
Preferred Stock:
|
|
|
Preferred Stock:
|
|
|
Additional Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Shares *
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Totals
|
|
|
Balance - December 31. 2016
|
|
|
532,190
|
|
|
$
|
532
|
|
|
|
|
|
|
$
|
|
|
|
$
|
26,077
|
|
|
$
|
(26,609
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from operations
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance - December 31. 2017
|
|
|
532,190
|
|
|
$
|
532
|
|
|
|
|
|
|
$
|
|
|
|
$
|
26,077
|
|
|
$
|
(26,609
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to related party
|
|
|
9,467,000
|
|
|
|
9,467
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
173,056
|
|
|
|
-
|
|
|
|
207,523
|
|
|
Release of related party note receivable and interest *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,105
|
)
|
|
|
|
|
|
|
(28,105
|
)
|
|
Forgiveness of related party debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,902
|
|
|
|
|
|
|
|
8,902
|
|
|
Net loss from operations
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
(192,713
|
)
|
|
|
(192,713
|
)
|
|
Balance - December 31. 2018
|
|
|
9,999,190
|
|
|
$
|
9,999
|
|
|
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
179,930
|
|
|
$
|
(219,322
|
)
|
|
|
(4,393
|
)
|
|
|
*
|
Common stock amounts have been adjusted to reflect 1 for
50 reverse stock split.
|
The accompanying notes are an integral part
of these financial statements.
FAVO REALTY, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(192,713
|
)
|
|
$
|
-
|
|
|
Adjustments to reconcile net loss to net cash (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock issued to related party
|
|
|
173,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
1,250
|
|
|
|
-
|
|
|
Loan payable – related party
|
|
|
3,143
|
|
|
|
-
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(15,264
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Cancellation of Notes receivable to Related party
|
|
|
(491,988
|
)
|
|
|
-
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(491,988
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Common stock issued to related party
|
|
|
473,350
|
|
|
|
-
|
|
|
Preferred stock issued to related party
|
|
|
25,000
|
|
|
|
-
|
|
|
Forgiveness of related party loan
|
|
|
8,902
|
|
|
|
-
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
507,252
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH – BEGINNING OF PERIOD
|
|
|
-
|
|
|
|
-
|
|
|
CASH – END OF PERIOD
|
|
$
|
-
|
|
|
$
|
-
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Cancellation of Notes receivable to Related party
|
|
|
(491,988
|
)
|
|
|
-
|
|
|
Common stock issued to related party
|
|
|
473,350
|
|
|
|
-
|
|
|
Preferred stock issued to related party
|
|
|
173,056
|
|
|
|
-
|
|
|
Forgiveness of related party loan
|
|
|
8,902
|
|
|
|
-
|
|
The accompanying notes are an integral part
of these financial statements.
FAVO REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD DECEMBER 31, 2018 and
DECEMBER 31, 2017
Note 1 – Organization and basis of accounting
Basis of Presentation and Organization
Favo Realty, Inc. was incorporated as Beeston
Enterprises Ltd. (“the Company”) on July 12, 1999 under the laws of the State of Nevada. The Company changed its name
to Favo Realty, Inc. on December 26, 2018, which was then declared effective by the Financial Industry Regulatory Authority (“FINRA”)
on January 9, 2019. Previously, the Company was an exploration stage company engaged in the search of mineral deposits that could
be developed to a state of a commercially viable producing mine. Currently, the Company is a real estate investment company which
intends to invest in a diversified portfolio of quality commercial real estate properties and other real estate investments located
throughout the United States and Puerto Rico. The Company intends to have a dual investment strategy. The majority of the portfolio
will be invested in what the company considers its Core Holdings. The objective for these core holdings is to own stabilized, fully
leased, secure real estate assets that provide durable, predictable cash flow to the Company. A smaller percentage of the portfolio
will be invested in what the Company classifies as Value-Add & Opportunistic Real Estate. These investments may include development
or redevelopment projects, repositioning of an asset and could include making physical improvements to a property that will allow
for higher rents and increased occupancy rates.
On May 30, 2014, the Company received approval
a 1-for-10 reverse stock split on its common stock outstanding from FINRA. On January 8, 2019, the Company received approval a
1-for-50 reverse stock split on its common stock outstanding from FINRA, as well as its symbol to “FAVO.”
On October 4, 2018, the eight judicial
District Court of Nevada appointed Custodian Ventures, LLC as custodian for Beeston Enterprises Ltd., proper notice having been
given to the officers and directors of Beeston Enterprises Ltd. There was no opposition.
On October 12, 2018, the Company filed
a certificate of reinstatement with the state of Nevada, and appointed David Lazar as, President, Secretary, Treasurer and Director.
On October 19, 2018, the Company obtained
a promissory note in amount of $464,150 from its custodian, Custodian Ventures, LLC, the managing member being David Lazar. The
note bears an interest of 3% and matures in 180 days from the date of issuance.
On October 19, 2018, the Company issued
473,350,000 shares of common stock, with par value $0.001 for par value payable in cash and a promissory note issued on that same
day for $464,150, to Custodian Ventures, LLC. In addition, David Lazar thereafter, published all of the missing filings with OTC
Markets for the Company, so that it became current with Pink Sheets information. There was no party that requested such services.
Prior to October 19, 2018, Custodian Ventures, LLC held a de minimus amount of shares of capital stock in the Company
On October 29, 2018, the Company terminated
its registration with the Securities and Exchange Commission.
On December 6, 2018, the Company issued
25,000,000 shares of super-voting shares of Series C Preferred Stock to Custodian Ventures, LLC in exchange for services rendered
to, and fees incurred by, the Company in the amount of $ 253,100,000.
On December 12, 2018, Custodian Ventures,
LLC sold (i) the 25,000,000 shares of Series C Preferred Stock to Vincent Napolitano, (ii) 5,000,000 shares of common stock to
Liro Holdings, LLC, and (iii) 468,350,000 shares of common stock to Favo Group, LLC for an aggregate purchase price of $175,000.
At this point there was a change of control of the Company and David Lazar resigned as President, Secretary, Treasurer and Director
and Vincent Napolitano was appointed as President, Secretary, Treasurer and Director.
The accompanying financial statements are
prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”). The Company
is a development stage enterprise devoting substantial efforts to establishing a new business, financial planning, raising capital,
and research into products which may become part of the Company’s product portfolio. The Company has not realized significant
sales through since inception. A development stage company is defined as one in which all efforts are devoted substantially to
establishing a new business and, even if planned principal operations have commenced, revenues are insignificant.
The accompanying financial statements have
been prepared assuming the continuation of the Company as a going concern. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. Management
of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding facility
is in effect. While management of the Company believes that it will be successful in its capital formation and planned operating
activities, there can be no assurance that the Company will be able to raise additional equity capital, or be successful in the
development and commercialization of the products it develops or initiates collaboration agreements thereon. The accompanying financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going
concern.
Note 2- Going Concern
The accompanying financial statements have
been prepared assuming the continuation of the Company as a going concern. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. Management
of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding facility
is in effect. While management of the Company believes that it will be successful in its capital formation and planned operating
activities, there can be no assurance that the Company will be able to raise additional equity capital or be successful in the
development and commercialization of the products it develops or initiates collaboration agreements thereon. The accompanying financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going
concern.
Note 3 – Summary of significant
accounting policies
Cash and Cash Equivalents
For purposes of reporting within the statements
of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all
highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Revenue Recognition
The Company recognize revenues when delivery
of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved
by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any
related receivable is probable.
Property and equipment
Property and equipment are stated at historical
cost less accumulated depreciation and impairment. The historical cost of acquiring an item of property and equipment includes
the costs necessarily incurred to bring it to the condition and location necessary for its intended use.
Income Taxes
The Company accounts for income taxes pursuant
to FASB ASC Topic 740, Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based
on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The
deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities
generating the differences.
The Company maintains a valuation allowance
with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing
the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current
period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward
period under the Federal tax laws.
Changes in circumstances, such as the Company
generating taxable income, could cause a change in judgment about the reliability of the related deferred tax asset. Any change
in the valuation allowance will be included in income in the year of the change in estimate.
Fair Value Measurement
The Company values its convertible notes
and amounts due to related partings and short term loans payable under FASB ASC 820 which defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value measurements.
Fair value is 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
(exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability,
including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable,
market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those
inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and
the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy
are as follows:
Level 1 – Quoted prices are available
in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions
for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1
primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 - Valuations for assets and liabilities
that can be obtained from readily available pricing sources via independent providers for market transactions involving similar
assets or liabilities. The Company’s principal markets for these securities are the secondary institutional markets, and
valuations are based on observable market data in those markets.
Level 3 – Pricing inputs include
significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed
methodologies that result in management’s best estimate of fair value. The Company uses Level 3 to value its derivative instruments.
Employee Stock-Based Compensation
The Company accounts for stock-based compensation
in accordance with ASC 718 Compensation - Stock Compensation (“ASC 718”). ASC 718 addresses all forms of share-based
payment (“SBP”) awards including shares issued under employee stock purchase plans and stock incentive shares. Under
ASC 718 awards result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of
awards that are expected to vest and will result in a charge to operations.
Estimates
The financial statements are prepared on
the basis of accounting principles generally accepted in the United States of America. The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of December 31, 2018 and 2017, and expenses for the years ended December 31, 2018
and 2017, and cumulative from inception. Actual results could differ from those estimates made by management.
Subsequent Event
The Company evaluated subsequent events
through the date when financial statements are issued for disclosure consideration.
Adoption of Recent Accounting Pronouncements
As of December 31, 2015, the Company adopted
guidance codified in ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt
Issuance Costs. The guidance simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented
as a deduction from the corresponding liability, consistent with debt discounts. The recognition and measurement guidance for debt
issuance costs is not affected. Therefore, these costs will continue to be amortized as interest expense using the effective interest
method pursuant to ASC 835-30-35-2 through 35-3. The Company has applied this guidance retrospectively to all prior periods presented
in the Company’s financial statements.
The Company has implemented all new accounting
pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new
accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Recent Accounting Pronouncements
In February 2016, the FASB issued an accounting
standards update for leases. The ASU introduces a lessee model that brings most leases on the balance sheet. The new standard also
aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB’s
new revenue recognition standard. However, the ASU eliminates the use of bright-line tests in determining lease classification
as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative
disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising
from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2019, and interim periods
within fiscal years beginning after December 15, 2020, for nonpublic entities using a modified retrospective approach. Early
adoption is permitted. The Company is still evaluating the impact that the new accounting guidance will have on its consolidated
financial statements and related disclosures and has not yet determined the method by which it will adopt the standard.
In March 2016, the FASB issued an accounting
standards update that provides a new requirement to record all of the tax effects related to share-based payments at settlement
(or expiration) through the income statement. This pronouncement is effective for annual reporting periods beginning after December 15,
2017, and interim periods within fiscal years beginning after December 15, 2018, for nonpublic entities. The Company is still
evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures
In August 2016, the FASB issued an accounting
standards update addressing the classification and presentation of eight specific cash flow issues that currently result in diverse
practices. The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in
the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments,
contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds
from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. This pronouncement
is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning
after December 15, 2019, for nonpublic entities. The amendments in this ASU should be applied using a retrospective approach.
The Company is still evaluating the impact that the new accounting guidance will have on its consolidated financial statements
and related disclosures.
Note 4 – Related Party Transactions
On October 19, 2018, the Company issued
473,350,000 shares of common stock to Custodian Ventures, LLC at par for shares valued at $473,350 in exchange for settlement of
a portion of a related party loan for amounts advanced to the Company in the amount of $9,200, and a promissory note issued to
the Company in the amount $464,150. The note is an unsecured, 3% simple interest bearing and due and payable in full within 180
days following written demand from the holder. As of December 31, 2018, a total of $464,150, which consists of principle of $464,150
and accrued interest of $2,785, is due to the Company.
On December 06, 2018, the Company issued
25,000,000 shares of Series C preferred stock to Custodian Ventures, LLC for shares valued at $253,125,000 in exchange for a promissory
note issued to the Company in the amount $25,000 and for services valued at $253,100,000. The note is an unsecured, 3% simple interest
bearing and due and payable in full within 180 days following written demand from the holder. As of December 31, 2018, a total
of $25,000, which consists of principle of $25,000 and accrued interest of $53, is due to the Company.
On December 12, 2018, Custodian Ventures,
LLC sold (i) the 25,000,000 shares of Series C Preferred Stock to Vincent Napolitano, (ii) 5,000,000 shares of common stock to
Liro Holdings, LLC, and (iii) 468,350,000 shares of common stock to Favo Group, LLC for an aggregate purchase price of $175,000.
At this point there was a change of control of the Company and David Lazar resigned as President, Secretary, Treasurer and Director
and Vincent Napolitano was appointed as President, Secretary, Treasurer and Director.
On December 13, 2018, the Company elected
to cancel any amounts due in principle and interest from Custodian Ventures, LLC on the October 19, 2018 promissory note of $464,150,
including accrued interest of $2,785. On that same date, the Company also elected to cancel any amounts due on the December 06,
2018 promissory note issued to the Company in the amount of $25,000, including accrued interest of $53. As of September 30, 2019,
both promissory notes had a balance of $0. The cancellation of both notes were recorded in additional paid in capital.
Note 5 – Stockholders Equity
Common Stock
On January 8, 2019, the Company received
approval a 1-for-50 reverse stock split on its common stock outstanding from FINRA.
As of December 31, 2018, 9,999,190 shares
of common stock with par value of $0.001 remains outstanding.
Preferred Stock
On December 06, 2018 the Company created
25,000,000 shares of Series C Preferred Stock, out of the 25,000,000 shares that were already authorized. On that same date, the
Company issued 25,000,000 shares of the Series C preferred stock to David Lazar, Chief Executive Officer for a promissory note
valued at $25,000 and for services valued at $173,056. On December 12, 2018, Custodian Ventures, LLC sold the 25,000,000 shares
of Series C Preferred Stock to Vincent Napolitano as part of a change of control. As of December 31, 2018, 25,000,000 shares of
preferred stock with par value of $0.001 per share remains outstanding.
The following is a description of the material rights of our
Series C Preferred Stock:
|
|
|
Each share of Series C Preferred Stock shall have a par value of $0.001 per share. The Series C Preferred Stock shall vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, on a 25 for one basis. If the Company effects a stock split which either increases or decreases the number of shares of Common Stock outstanding and entitled to vote, the voting rights of the Series A shall not be subject to adjustment unless specifically authorized.
|
|
|
|
|
|
|
|
Each share of Series C Preferred Stock
shall be convertible into 4 shares of Common Stock (“Conversion Ratio”), at the option of a Holder, at any time and
from time to time, from and after the issuance of the Series C Preferred Stock.
Subject to the rights of any existing series
of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence,
the holders of shares of Series C Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor,
upon any payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling
the holder thereof to receive, directly or indirectly, additional shares of Common Stock of the Corporation) on the Common Stock
of the Corporation, as and if declared by the Board of Directors, as if the Series C Preferred Stock had been converted into Common
Stock.
|
In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the holders of the Series C Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the price per share actually paid to the Corporation upon the initial issuance of the Series C Preferred Stock (each, the “the Original Issue Price”) for each share of Series A Preferred Stock then held by them, plus declared but unpaid dividends. Unless the Corporation can establish a different Original Issue Price in connection with a particular sale of Series C Preferred Stock, the Original issue price shall be $0.001 per share for the Series C Preferred Stock. If, upon the occurrence of any liquidation, dissolution or winding up of the Corporation, the assets and funds thus distributed among the holders of the Series C Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the each series of Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.
The Series C Preferred Stock shares are nonredeemable other than upon the mutual agreement of the Company and the holder of shares to be redeemed, and even in such case only to the extent permitted by this Certificate of Designation, the Corporation’s Articles of Incorporation and applicable law.
Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price of the Series C Preferred Stock by the Series C Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion.
Each share of Series C Preferred Stock shall automatically be converted into shares of Common Stock at the applicable Series C Conversion Price in effect for such share immediately upon the earlier of (i) except as provided below in Section 4(c), the Corporation’s sale of its Common Stock in a public offering pursuant to a registration statement under the Securities Act of 1933, as amended; (ii) a liquidation, dissolution or winding up of the Corporation as defined in section 2(c) above but subject to any liquidation preference required by section 2(a) above; or (iii) the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of Series C Preferred Stock.
Note 6 – Income Taxes
The Company provides for income taxes under
FASB ASC 740, Accounting for Income Taxes. FASB ASC 740 requires the use of an asset and liability approach in accounting for income
taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases
of assets and liabilities and the tax rates in effect currently.
FASB ASC 740 requires the reduction of
deferred tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate
sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to
the deferred tax asset has been recorded. The total deferred tax asset is $3,801 which is calculated by multiplying a 21% estimated
tax rate by the cumulative net operating loss (NOL) adjusted for the following items:
|
For the period ended December 31,
|
|
2018
|
|
|
Book loss for the year
|
|
$
|
(192,713
|
)
|
|
Adjustments:
|
|
|
|
|
|
Accrued expenses
|
|
|
1,250
|
|
|
Stock Compensation
|
|
|
173,056
|
|
|
|
|
|
|
|
|
Tax loss for the year
|
|
|
(18,407
|
)
|
|
|
|
|
|
|
|
Estimated effective tax rate
|
|
|
21
|
%
|
|
Deferred tax asset
|
|
$
|
3,865
|
|
Details for
the last period are as follows:
|
For the period ended December 31,
|
|
2018
|
|
|
Deferred tax asset
|
|
$
|
3,865
|
|
|
Valuation allowance
|
|
|
(3,865
|
)
|
|
Current taxes payable
|
|
|
-
|
|
|
Income tax expense
|
|
$
|
-
|
|
Below is a chart showing the estimated
corporate federal net operating loss (NOL) and the year in which it will expire. The total NOL carry forward as of December 31,
2018 was $3,801 as itemized below:
|
Year
|
|
|
Amount
|
|
|
Expiration
|
|
|
|
2019
|
|
|
$
|
3,865
|
|
|
|
2038
|
|
Note 7 – Subsequent
Events
On January 8, 2019, the Company received
approval a 1-for-50 reverse stock split on its common stock outstanding from FINRA, as well as its symbol to “FAVO.”
FAVO REALTY, INC.
BALANCE SHEETS
(Unaudited)
|
|
|
September 30,
2019
|
|
|
December 31,
2018
|
|
|
ASSETS
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
Investment in cryptocurrency, net
|
|
$
|
940
|
|
|
$
|
-
|
|
|
Total non-current assets
|
|
|
940
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
940
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
650
|
|
|
|
1,250
|
|
|
Loan payable, related party
|
|
|
147,000
|
|
|
|
3,143
|
|
|
Total current liabilities
|
|
|
147,650
|
|
|
|
4,393
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Series C Preferred stock, par value $0.001 per share; 25,000,000 shares authorized; 25,000,000 outstanding
|
|
|
25,000
|
|
|
|
25,000
|
|
|
Common stock, par value $0.001 per share; 500,000,000 shares authorized; 19,645,818 shares and 9,999,190 shares issued and outstanding in September 30, 2019 and December 31, 2018, respectively
|
|
|
19,645
|
|
|
|
9,999
|
|
|
Additional paid in capital
|
|
|
4,410,505
|
|
|
|
179,930
|
|
|
Accumulated deficit
|
|
|
(4,601,860
|
)
|
|
|
(219,322
|
)
|
|
Total stockholders’ equity
|
|
|
(146,711
|
)
|
|
|
(4,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
940
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these financial statements.
FAVO REALTY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryptocurrency mining
|
|
$
|
41,890
|
|
|
$
|
–
|
|
|
$
|
41,890
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
(64,368
|
)
|
|
|
-
|
|
|
|
(64,368
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (loss)
|
|
|
(22,479
|
)
|
|
|
|
|
|
|
(22,479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
15,011
|
|
|
|
-
|
|
|
|
37,038
|
|
|
|
-
|
|
|
Professional fees
|
|
|
10,000
|
|
|
|
-
|
|
|
|
83,741
|
|
|
|
3,600
|
|
|
Impairment of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
3,690,598
|
|
|
|
-
|
|
|
Total operating expense
|
|
|
25,011
|
|
|
|
-
|
|
|
|
3,811,377
|
|
|
|
3,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(47,489
|
)
|
|
|
-
|
|
|
|
(3,833,856
|
)
|
|
|
(3,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on digital currencies
|
|
|
(3,566
|
)
|
|
|
-
|
|
|
|
(3,566
|
)
|
|
|
|
|
|
Loss on sale of cryptocurrency mining equipment
|
|
|
(545,117
|
)
|
|
|
-
|
|
|
|
(545,117
|
)
|
|
|
-
|
|
|
Total other income (loss)
|
|
|
(548,683
|
)
|
|
|
-
|
|
|
|
(548,683
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(596,172
|
)
|
|
$
|
-
|
|
|
$
|
(4,382,538
|
)
|
|
$
|
(3,600
|
)
|
|
Net loss per common share – basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
|
|
$
|
(0.00
|
)
|
|
Weighted average common shares outstanding – basic and diluted
|
|
|
19,645,776
|
|
|
|
532,190
|
|
|
|
16,265,950
|
|
|
|
532,190
|
|
The accompanying notes are an integral part
of these financial statements.
FAVO REALTY, INC.
STATEMENT OF STOCKHOLDERS’ (DEFICIT)
FOR THE PERIOD SEPTEMBER 30, 2019 AND
SEPTEMBER 30, 2018
(Unaudited)
|
|
|
Common Stock:
Shares *
|
|
|
Common Stock:
Amount
|
|
|
Preferred Stock:
Shares
|
|
|
Preferred Stock:
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31. 2017
|
|
|
532,190
|
|
|
$
|
532
|
|
|
|
|
|
|
$
|
|
|
|
$
|
26,077
|
|
|
$
|
(26,609
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from operations
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
(3,600
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - September 30, 2018
|
|
|
532,190
|
|
|
$
|
532
|
|
|
|
|
|
|
$
|
|
|
|
$
|
26,077
|
|
|
$
|
(30,209
|
)
|
|
|
(3,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2018
|
|
|
9,999,190
|
|
|
$
|
9,999
|
|
|
|
25,000,000
|
|
|
$
|
25,000
|
|
|
$
|
179,930
|
|
|
$
|
(192,713
|
)
|
|
|
(4,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in RLT Acquisition
|
|
|
9,646,586
|
|
|
|
9,646
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,230,575
|
|
|
|
-
|
|
|
|
4,240,221
|
|
|
Net loss from operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,382,538
|
)
|
|
|
(4,382,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - September 30, 2019
|
|
|
19,645,776
|
|
|
$
|
19,645
|
|
|
|
25,000,000
|
|
|
$
|
25,000
|
|
|
$
|
4,410,505
|
|
|
$
|
(4,601,860
|
)
|
|
|
(146,711
|
)
|
|
|
*
|
Common stock amounts have been adjusted to reflect 1 for
50 reverse stock split.
|
The accompanying notes are an integral part
of these financial statements.
FAVO REALTY, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD
(Unaudited)
|
|
|
For the period ended September 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,382,538
|
)
|
|
$
|
(3,600
|
)
|
|
Adjustments to reconcile net loss to net cash (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on digital currencies
|
|
|
3,566
|
|
|
|
-
|
|
|
Impairment of assets
|
|
|
3,690,598
|
|
|
|
|
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(600
|
)
|
|
|
-
|
|
|
Loan payable – related party
|
|
|
147,857
|
|
|
|
3,600
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(545,117
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Acquisition of RLT Atwood Assets
|
|
|
-
|
|
|
|
-
|
|
|
Loss on sale of crypto-mining equipment
|
|
|
545,117
|
|
|
|
-
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
545,117
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Common stock issued for acquisition
|
|
|
-
|
|
|
|
-
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH – BEGINNING OF PERIOD
|
|
|
-
|
|
|
|
-
|
|
|
CASH – END OF PERIOD
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
-
|
|
|
|
-
|
|
|
Cash paid for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Acquisition of RLT Atwood assets
|
|
|
(4,240,221
|
)
|
|
|
-
|
|
|
Common stock issued for acquisition
|
|
|
4,240,221
|
|
|
|
-
|
|
The accompanying notes are an integral part
of these financial statements.
FAVO REALTY, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD SEPTEMBER 30, 2019 and
DECEMBER 31, 2018
Note 1 – Organization and basis of accounting
Basis of Presentation and Organization
Favo Realty, Inc. was incorporated as Beeston
Enterprises Ltd. (“the Company”) on July 12, 1999 under the laws of the State of Nevada. The Company changed its name
to Favo Realty, Inc. on December 26, 2018, which was then declared effective by the Financial Industry Regulatory Authority (“FINRA”)
on January 9, 2019. Previously, the Company was an exploration stage company engaged in the search of mineral deposits that could
be developed to a state of a commercially viable producing mine. Currently, the Company is a real estate investment company which
intends to invest in a diversified portfolio of quality commercial real estate properties and other real estate investments located
throughout the United States and Puerto Rico. The Company intends to have a dual investment strategy. The majority of the portfolio
will be invested in what the company considers its Core Holdings. The objective for these core holdings is to own stabilized, fully
leased, secure real estate assets that provide durable, predictable cash flow to the Company. A smaller percentage of the portfolio
will be invested in what the Company classifies as Value-Add & Opportunistic Real Estate. These investments may include development
or redevelopment projects, repositioning of an asset and could include making physical improvements to a property that will allow
for higher rents and increased occupancy rates.
On May 30, 2014, the Company received approval
a 1-for-10 reverse stock split on its common stock outstanding from FINRA.
On October 4, 2018, the eight judicial District Court of Nevada
appointed Custodian Ventures, LLC as custodian for Beeston Enterprises Ltd., proper notice having been given to the officers and
directors of Beeston Enterprises Ltd. There was no opposition.
On October 12, 2018, the Company filed
a certificate of reinstatement with the state of Nevada, and appointed David Lazar as, President, Secretary, Treasurer and Director.
On October 19, 2018, the Company obtained
a promissory note in amount of $464,150 from its custodian, Custodian Ventures, LLC, the managing member being David Lazar. The
note bears an interest of 3% and matures in 180 days from the date of issuance.
On October 19, 2018, the Company issued
473,350,000 shares of common stock, with par value $0.001 for par value payable in cash and a promissory note issued on that same
day for $464,150, to Custodian Ventures, LLC. In addition, David Lazar thereafter, published all of the missing filings with OTC
Markets for the Company, so that it became current with Pink Sheets information. There was no party that requested such services.
Prior to October 19, 2018, Custodian Ventures, LLC held a de minimus amount of shares of capital stock in the Company
On October 29, 2018, the Company terminated
its registration with the Securities and Exchange Commission.
On December 6, 2018, the Company issued
25,000,000 shares of super-voting shares of Series C Preferred Stock to Custodian Ventures, LLC in exchange for services rendered
to, and fees incurred by, the Company.
On December 12, 2018, Custodian Ventures,
LLC sold (i) the 25,000,000 shares of Series C Preferred Stock to Vincent Napolitano, (ii) 5,000,000 shares of common stock to
Liro Holdings, LLC, and (iii) 468,350,000 shares of common stock to Favo Group, LLC for an aggregate purchase price of $175,000.
At this point there was a change of control of the Company and David Lazar resigned as President, Secretary, Treasurer and Director
and Vincent Napolitano was appointed as President, Secretary, Treasurer and Director.
On January 8, 2019, the Company received
approval a 1-for-50 reverse stock split on its common stock outstanding from FINRA, as well as its symbol to “FAVO.”
The accompanying financial statements are
prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”). The Company
is a development stage enterprise devoting substantial efforts to establishing a new business, financial planning, raising capital,
and research into products which may become part of the Company’s product portfolio. The Company has not realized significant
sales through since inception. A development stage company is defined as one in which all efforts are devoted substantially to
establishing a new business and, even if planned principal operations have commenced, revenues are insignificant.
The accompanying financial statements have
been prepared assuming the continuation of the Company as a going concern. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. Management
of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding facility
is in effect. While management of the Company believes that it will be successful in its capital formation and planned operating
activities, there can be no assurance that the Company will be able to raise additional equity capital, or be successful in the
development and commercialization of the products it develops or initiates collaboration agreements thereon. The accompanying financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going
concern.
Note 2 – Going Concern
The accompanying financial statements have
been prepared assuming the continuation of the Company as a going concern. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. Management
of the Company is making efforts to raise additional funding until a registration statement relating to an equity funding facility
is in effect. While management of the Company believes that it will be successful in its capital formation and planned operating
activities, there can be no assurance that the Company will be able to raise additional equity capital or be successful in the
development and commercialization of the products it develops or initiates collaboration agreements thereon. The accompanying financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going
concern.
Note 3 – Summary of significant
accounting policies
Investment in Cryptocurrency
Cryptocurrencies consist of Bitcoin, Litecoin
and Ethereum, generally received for the Company’s own account as compensation for cryptocurrency mining services. Given
that there is limited precedent regarding the classification and measurement of cryptocurrencies under current Generally Accepted
Accounting Principles (“GAAP”), the Company has determined to account for these digital currencies as indefinite-lived
intangible assets in accordance with Accounting Standards Update (“ASU”) No. 350
Goodwill
We test goodwill for impairment at the
reporting unit level on an annual basis or more frequently if an event occurs or circumstances change that indicate that the fair
value of a reporting unit is likely to be below its carrying amount. We also test goodwill for impairment when there is a change
in reporting units.
We may elect to perform a qualitative assessment
that considers economic, industry and company-specific factors for all or selected reporting units. If, after completing this assessment,
it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we proceed
to a quantitative test. We may also elect to perform a quantitative test instead of a qualitative assessment for any or all of
our reporting units.
Quantitative testing requires a comparison
of the fair value of each reporting unit to its carrying value. We typically use the discounted cash flow method to estimate the
fair value of our reporting units. The discounted cash flow method incorporates various assumptions, the most significant being
projected revenue growth rates, operating margins and cash flows, the terminal growth rate and the weighted-average cost of capital.
If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired and any loss must be measured.
To determine the amount of the impairment loss, the implied fair value of goodwill is determined by assigning a fair value to all
of the reporting unit’s assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been
acquired in a business combination at fair value. If the carrying amount of the reporting unit goodwill exceeds the implied fair
value of that goodwill, an impairment loss would be recognized in an amount equal to that excess.
There was an impairment charge recorded
during the nine months ended September 30, 2019 of $3,690.598.
Revenue Recognition
Effective July 1, 2018, we adopted ASC
606, Revenue from Contracts with Customers, as amended, using the modified retrospective method, which requires the cumulative
effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. There was no cumulative
effect of adopting the new standard and no impact on our financial statements. The new standard provides a single comprehensive
model to be used in the accounting for revenue arising from contracts with customers and supersedes current revenue recognition
guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. To achieve this core principle, ASC 606 includes provisions within
a five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract,
determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when,
or as, an entity satisfies a performance obligation.
Our revenues currently consist of cryptocurrency
mining revenues recognized in accordance with ASC 606 as discussed above. Amounts collected from customers prior to shipment of
products are recorded as deferred revenue.
The Company earns its cryptocurrency mining
revenues by providing hashrate verification service in the mining of bitcoins. The Company satisfies its performance obligation
at the point in time that the Company is awarded a unit of digital currency. In consideration for these services, the Company receives
bitcoins, which are recorded as revenue using the closing U.S. dollar price of the related cryptocurrency on the date of receipt.
Expenses associated with running the cryptocurrency mining operations, such as equipment depreciation, rent, operating supplies,
rent, utilities and monitoring services are recorded as cost of revenues.
There is currently no specific definitive
guidance in GAAP or alternative accounting frameworks for the accounting for the production and mining of digital currencies and
management has exercised significant judgment in determining appropriate accounting treatment for the recognition of revenue for
mining of digital currencies. Management has examined various factors surrounding the substance of the Company’s operations
and the guidance in ASC 606, including identifying the transaction price, when performance obligations are satisfied, and collectability
is reasonably assured being the completion and addition of a block to a blockchain and the award of a unit of digital currency
to the Company. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies
which could result in a change in the Company’s financial statements.
Property and equipment
Property and equipment are stated at historical
cost less accumulated depreciation and impairment. The historical cost of acquiring an item of property and equipment includes
the costs necessarily incurred to bring it to the condition and location necessary for its intended use.
Income Taxes
The Company accounts for income taxes pursuant
to FASB ASC Topic 740, Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based
on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The
deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities
generating the differences.
The Company maintains a valuation allowance
with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing
the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current
period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward
period under the Federal tax laws.
Changes in circumstances, such as the Company
generating taxable income, could cause a change in judgment about the reliability of the related deferred tax asset. Any change
in the valuation allowance will be included in income in the year of the change in estimate.
Estimates
The financial statements are prepared on
the basis of accounting principles generally accepted in the United States of America. The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of September 30, 2019 and 2017, and expenses for the years ended December 31, 2018
and 2017, and cumulative from inception. Actual results could differ from those estimates made by management.
Subsequent Event
The Company evaluated subsequent events
through the date when financial statements are issued for disclosure consideration.
Adoption of Recent Accounting Pronouncements
The Company has implemented all new accounting
pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new
accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Note 4 – RLT Atwood Acquisition
In April 2019, the Company acquired the
digital currency mining operations of RLT Atwood International (“RLT”) through one Asset Purchase Agreements (the “RLT
Acquisition”) in a transaction recorded as a business combination.
On April 6, 2019, the Company entered into
an Asset Purchase Agreement with RLT for the purchase of RLT’s digital currency mining assets located in Alpharetta, GA,
the principal assets consisting of: 801 cryptocurrency mining machines; various office equipment; and various digital currencies.
The Company issued 9,645,586 shares of its common stock to RLT shareholders as consideration.
|
The total consideration paid in the Acquisition is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Value of 9,646,586 common shares issued to RLT Shareholders
|
|
$
|
4,240,221
|
|
|
|
|
|
|
|
|
Total consideration paid
|
|
$
|
4,240,221
|
|
|
|
|
|
|
|
|
The total consideration paid was allocated to the fair value of the assets acquired as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
$
|
545,117
|
|
|
Cryptocurrencies
|
|
|
4,506
|
|
|
Goodwill
|
|
|
3,690,598
|
|
|
|
|
|
|
|
|
Total consideration allocated
|
|
$
|
4,240,221
|
|
No liabilities of RLT were assumed by the
Company in the Acquisition. The excess of consideration paid over fair value of assets acquired was recorded as goodwill. As of
September 30, 2019, the Company’s management determined that goodwill was 100% fully impaired.
On July 2, 2019, the Company formed Favo
Blockchain, Inc. (“Blockchain”) and contributed all of the Assets to Blockchain which now operates the blockchain business.
On August 5, 2019, Hydro66 Svenska AB (“Hydro66”) purchased the Cryptocurrency mining equipment from Blockchain for
1 SEK Hydro66, and Hydro66 will provide a managed hash rate service for FAVO Blockchain, Inc, Hydro66 have installed, powered up
and configured the mining equipment. As a result, the Company recorded a $545,117 loss on the sale of the Cryptocurrency mining
equipment.
Note 5 – Related Party Transactions
On October 19, 2018, the Company issued
473,350,000 shares of common stock to Custodian Ventures, LLC at par for shares valued at $473,350 in exchange for settlement of
a portion of a related party loan for amounts advanced to the Company in the amount of $9,200, and a promissory note issued to
the Company in the amount $464,150. The note is an unsecured, 3% simple interest bearing and due and payable in full within 180
days following written demand from the holder. As of December 31, 2018, a total of $464,150, which consists of principle of $464,150
and accrued interest of $2,785, is due to the Company.
On December 06, 2018, the Company issued
25,000,000 shares of Series C preferred stock to Custodian Ventures, LLC at par for shares valued at $25,000 in exchange for a
promissory note issued to the Company in the amount $25,000. The note is an unsecured, 3% simple interest bearing and due and payable
in full within 180 days following written demand from the holder. As of December 31, 2018, a total of $25,000, which consists of
principle of $25,000 and accrued interest of $53, is due to the Company.
On December 12, 2018, Custodian Ventures,
LLC sold (i) the 25,000,000 shares of Series C Preferred Stock to Vincent Napolitano, (ii) 5,000,000 shares of common stock to
Liro Holdings, LLC, and (iii) 468,350,000 shares of common stock to Favo Group, LLC for an aggregate purchase price of $175,000.
At this point there was a change of control of the Company and David Lazar resigned as President, Secretary, Treasurer and Director
and Vincent Napolitano was appointed as President, Secretary, Treasurer and Director.
On December 13, 2018, the Company elected
to cancel any amounts due in principle and interest from Custodian Ventures, LLC on the October 19, 2018 promissory note of $464,150,
including accrued interest of $2,785. On that same date, the Company also elected to cancel any amounts due on the December 06,
2018 promissory note issued to the Company in the amount of $25,000, including accrued interest of $53. As of September 30, 2019,
both promissory notes had a balance of $0. The cancellation of both notes were recorded in additional paid in capital.
Note 6 – Stockholders Equity
Common Stock
On October 19, 2018, the Company issued
473,350,000 shares of common stock to Custodian Ventures, LLC at par for shares valued at $473,350 in exchange for settlement of
a portion of a related party loan for amounts advanced to the Company in the amount of $9,200, and the promissory note issued to
the Company in the amount $464,150.
Preferred Stock
On December 06, 2018 the Company created
25,000,000 shares of Series C Preferred Stock, out of the 25,000,000 shares that were already authorized. On that same date, the
Company issued 25,000,000 shares of the Series C preferred stock to David Lazar, Chief Executive Officer for a promissory note
valued at $25,000 and for services valued at $173,056. On December 12, 2018, Custodian Ventures, LLC sold the 25,000,000 shares
of Series C Preferred Stock to Vincent Napolitano as part of a change of control.
The following is a description of the material rights of our
Series C Preferred Stock:
|
|
|
Each share of Series C Preferred Stock shall have a par value of $0.001 per share. The Series C Preferred Stock shall vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, on a 25 for one basis. If the Company effects a stock split which either increases or decreases the number of shares of Common Stock outstanding and entitled to vote, the voting rights of the Series A shall not be subject to adjustment unless specifically authorized.
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Each share of Series C Preferred Stock
shall be convertible into 4 shares of Common Stock (“Conversion Ratio”), at the option of a Holder, at any time and
from time to time, from and after the issuance of the Series C Preferred Stock.
Subject to the rights of any existing series
of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence,
the holders of shares of Series C Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor,
upon any payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling
the holder thereof to receive, directly or indirectly, additional shares of Common Stock of the Corporation) on the Common Stock
of the Corporation, as and if declared by the Board of Directors, as if the Series C Preferred Stock had been converted into Common
Stock.
In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, subject to the rights of any existing series of Preferred Stock
or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the holders of the
Series C Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the price per share
actually paid to the Corporation upon the initial issuance of the Series C Preferred Stock (each, the “the Original Issue
Price”) for each share of Series A Preferred Stock then held by them, plus declared but unpaid dividends. Unless the Corporation
can establish a different Original Issue Price in connection with a particular sale of Series C Preferred Stock, the Original issue
price shall be $0.001 per share for the Series C Preferred Stock. If, upon the occurrence of any liquidation, dissolution or winding
up of the Corporation, the assets and funds thus distributed among the holders of the Series C Preferred Stock shall be insufficient
to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of any existing series
of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence,
the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders
of the each series of Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive.
The Series C Preferred Stock shares are
nonredeemable other than upon the mutual agreement of the Company and the holder of shares to be redeemed, and even in such case
only to the extent permitted by this Certificate of Designation, the Corporation’s Articles of Incorporation and applicable
law.
Series C Preferred Stock shall be convertible,
at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or
any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Original Issue Price of the Series C Preferred Stock by the Series C Conversion Price applicable to such share, determined
as hereafter provided, in effect on the date the certificate is surrendered for conversion.
Each share of Series C Preferred Stock
shall automatically be converted into shares of Common Stock at the applicable Series C Conversion Price in effect for such share
immediately upon the earlier of (i) except as provided below in Section 4(c), the Corporation’s sale of its Common Stock
in a public offering pursuant to a registration statement under the Securities Act of 1933, as amended; (ii) a liquidation, dissolution
or winding up of the Corporation as defined in section 2(c) above but subject to any liquidation preference required by section
2(a) above; or (iii) the date specified by written consent or agreement of the holders of a majority of the then outstanding shares
of Series C Preferred Stock.
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Note 7 – Subsequent
Events
The Company evaluated subsequent events
through the date when financial statements are issued for disclosure consideration and none were noted.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
In its two most recent fiscal years, the
Company has had no disagreements with its independent accountants.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
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Exhibit No.
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Description
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2
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Notice of Entry of Order, Eight Judicial District Court, Clark County, Nevada, Case No.: A-18-780142-P.
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3.1
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Articles of Incorporation – (Incorporated by reference from Form SB-2, filed on March 5, 2003, Exhibit 3.1).
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3.2
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Amendment to Articles of Incorporation- (Incorporated by reference from Form SB-2, filed on March 5, 2003, Exhibit 3.1).
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3.3
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By-laws (Incorporated by reference from Form SB-2, filed on March 5, 2003, Exhibit 3.1).
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3.4
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Certificate of Amendment by Custodian, dated October 12, 2018 (Incorporated by reference from Form 10-12g, filed on December 12, 2019).
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3.5
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Certificate of Designation filed with the State of Nevada, December 5, 2018 (Incorporated by reference from Form 10-12g, filed on December 12, 2019).
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3.6
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Certificate of Reinstatement filed with the State of Nevada, dated October 12, 2018 (Incorporated by reference from Form 10-12g, filed on December 12, 2019).
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3.7
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Certificate of Amendment, dated December 26, 2018 (Incorporated by reference from Form 10-12g, filed on December 12, 2019).
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3.8
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Certificate of Incorporation of Favo Blockchain, Inc., dated July 2, 2019 (Incorporated by reference from Form 10-12g, filed on December 12, 2019).
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10.1
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Asset Purchase Agreement, by and between
the Company and RLT Atwood International, dated April 6, 2019.
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10.2
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Order form contract, by and between the Company
and Hydro66 Holdings Corp., dated August 5, 2019.
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10.3
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Management Agreement, by and between the
Company and Favo Group, LLC, dated August 1, 2019.
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10.4
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Management Agreement, by and among the Company,
Favo Blockchain, Inc., and Favo Group, LLC
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23
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Consent of Independent Auditor
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SIGNATURES
Pursuant to the requirements of Section
12 of the Securities Exchange Act of 1934, the Company has duly caused this amended registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
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Date: January 31, 2020
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Favo Realty, Inc.
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By:
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Vincent Napolitano, CEO
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/s/ Vincent Napolitano
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