EDGAR 10-K Filing

Company CIK: 1696195
Filing Year: 2021
Filename: 1696195_10-K_2021_0001493152-21-023809.json

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ITEM 1. BUSINESS
Item 1. Business.
Item 1.A Risk Factors.
Item 2. Properties
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Item 9 A. Controls and Procedures.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
SIGNATURES
KINETIC GROUP INC.
FORWARD LOOKING STATEMENTS
This Annual Report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
● the uncertainty of profitability based upon our history of losses;
● risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern;
● risks related to our international operations and currency exchange fluctuations; and
● other risks and uncertainties related to our business plan and business strategy.
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common stock” refer to the common shares in our capital stock.
As used in this annual report, the terms “we”, “us”, “our”, the “Company” and “Kinetic Group” mean Kinetic Group Inc. and its wholly owned subsidiary Kinetic Development Inc, unless otherwise indicated.
Item 1. BUSINESS
Our Business
Kinetic Group Inc., a Nevada corporation, was formed under the laws of the State of Nevada on June 6, 2014. Kinetic Group is a full service integrated digital marketing agency. The company provides marketing and strategy services to early stage companies.
On March 17, 2020, the “Company entered into a rescission agreement (the “Rescission Agreement”) with Corette, LLC (“Corette”) pursuant to which (i) the acquisition of Solstice Marketing Concepts LLC (the “Acquisition”) was rescinded and rendered void ab initio and (the “Rescission”) (ii) the 26,349,800 shares received by Corette in connection with the Acquisition were transferred back to the Company for cancellation.
Mutual Release
Pursuant to the Rescission Agreement, each of the Company and Corette on behalf of itself and its respective partners, agents, assigns, heirs, officers, directors, employees, executors, and attorneys (“Affiliates”) forever and finally released, relieved, acquitted, absolved and discharged the other party and its Affiliates from any and all losses, claims, debts, liabilities, demands, obligations, promises, acts, omissions, agreements, costs and expenses, damages, injuries, suits, actions and causes of action, of whatever kind or nature, whether known or unknown, suspected or unsuspected, contingent or fixed, that they may have against the other party and its Affiliates, including, without limitation, claims for indemnification, based upon, related to, or by reason of any matter, cause, fact, act, or omission occurring or arising from the Acquisition; except for those arising from the Rescission Agreement, including, without limitation, in connection with the representations and warranties contained in the Rescission Agreement.
Trade Payables
In connection with the Rescission, Corette has agreed that certain payables owed by the Company, including but not limited to, amounts owed to Company’s auditor, transfer agent, accountants, consultants, counsel and other service providers and any amounts owed under consulting, employment, service or similar agreements, will be assumed in full by Fairway, LLC, an affiliate of Corette.
Indemnity
Subject to a $50,000 limit, the Company agreed in the Rescission Agreement to indemnify, defend, and hold harmless the Corette, Fairway, LLC, Nathan Rosenberg and Claudio Dotta (the “Corette Principals”) and their respective directors, managers, members, officers, shareholders, agents, representatives, successors, heirs and assigns (each, a “Corette Indemnified Party”) from and against all demands, claims, actions, causes of action, assessments, losses, damages, liabilities, costs and expenses, including, without limitation, interest, penalties and reasonable attorneys’ fees and expenses (collectively, “Damages”), directly asserted against, resulting to, imposed upon or incurred by a Corette Indemnified Party at any time after the date of the Rescission Agreement, by reason of, resulting from or in connection with: (i) any failure or breach by the Company and officers, directors, shareholders, agents, representatives, successors and assigns to perform any of its covenants, agreements, or obligations under the Rescission Agreement; (ii) any inaccuracy or incompleteness of any of the representations and warranties of the Company contained in the Rescission Agreement; (iii) any act and/or omission by the Company, including, without limitation, any act taken, or any document executed, by Corette, and/or the Corette Principals, as applicable, as a member of the Board of Directors or officer of the Company, or upon advice of the Company’s counsel; or (iv) claims from or related to the Acquisition and the Rescission (collectively, the “Corette Claims”).
Effective March 24, 2020, Company, Cantek Holdings (2020) Ltd., an Israeli company (“Cantek”) and the shareholders of Cantek (the “Cantek Shareholders”) entered into a Share Exchange Agreement pursuant to which the Company agreed to acquire 100% of the outstanding shares of Cantek in exchange for the issuance of 26,349,800 shares of common stock of the Company to the Cantek Shareholders and the Company’s commitment to issue 4,115,020 shares of preferred stock of the Company, each convertible into ten shares of Common Stock of the Company to the Cantek Shareholders in the future (the “Exchange Agreement”).
Cantek is a diverse, vertically aligned cannabis company centered around an extensive growing, processing and distribution operation in Israel for distribution domestically and in the European Union. Cantek is also supporting R&D operations to develop unique devices for more effective and controlled consumption, and intends to develop innovative products, cannabis strains and extraction methodology.
The Exchange Agreement included representations and warranties of each of the Company. The Exchange Agreement provides that, if (i) the Company does not receive firm written commitments for investment not less than $15,000,000 on or before December 31, 2020, (ii) the Company fails to file its quarterly and annual reports on forms 10-Q and 10-K (the “Reports”) for the 12-month period following the date hereof (not including any filings with respect to the period prior to the Closing Date which have not been completed as of the date hereof), (iii) any of the representations and warranties of the Company shall have been untrue as of the date on which such representation or warranty was made or (iv) Chasdei Hashem Holdings Ltd, the primary shareholder of Cantek, and Aitan Zacharin mutually agree, the transactions contemplated by the Exchange Agreement may be reversed and will lose all force and effect, with the shares of Cantek reverting to the Cantek Shareholders and the Exchange Shares treated as though they were never issued by the Company.
On November 1, 2020, Kinetic Group Inc. (the “Company”) entered into a Notice of Termination and Release agreement with Cantek Holdings (2020) Ltd., an Israeli company (“Cantek”) and the shareholders of Cantek (the “Cantek Shareholders”) pursuant to which the Company Company released any and all claims against Cantek, the Cantek Shareholders and other parties (the “Related Parties”) and the and the Company agreed to indemnify Cantek and the Cantek Shareholders against any and all claims, losses, damages, fees, expenses that arise out of or are in any connected to its association with the Company, including, but not limited to, the Exchange Agreement and Note (each as defined below) any indebtedness of the Company.
On November 1, 2020, in accordance with the terms of the Exchange Agreement, dated March 24, 2020, among the Company, Cantek and the Cantek Shareholders (the “Exchange Agreement”), the Company and Cantek mutually agreed to immediately reverse the transactions thereunder. Under the Exchange Agreement, the Company agreed to acquire 100% of the outstanding shares of Cantek in exchange for the issuance of 26,349,800 shares of common stock of the Company to the Cantek Shareholders and the Company’s commitment to issue 4,115,020 shares of preferred stock of the Company, each convertible into ten shares of Common Stock of the Company to the Cantek Shareholders in the future (the “Exchange Agreement”) and reversed the transactions contemplated thereby. As a result, the Company no longer has any ownership or other interest in Cantek and the Cantek Shareholders no longer have any ownership interest in the Company.
As previously disclosed in the current report on Form 8-K filed by the Company on March 24, 2020 (the “March 24 8-K”), the Company (i) entered into a rescission agreement (the “Rescission Agreement”) with Corette, LLC (“Corette”) pursuant to which the acquisition by the Company of Solstice Marketing Concepts LLC was rescinded and rendered void ab initio and (ii) the $1,200,000 convertible note (the “Note”) issued by the Company to Shaidim Enterprises, LLC (“Shaidim”) was assumed by Fairway, LLC, an affiliate of Corette.
Contrary to what the Company understood at the time of the March 24 8-K, Shaidim formally declared on July 20, 2020 that it did not, in fact, consent to the assignment of the Note. Therefore, the Note remains a direct obligation of the Company. As a further result of the lack of consent from Shaidim to assign the Note to Fairway, (i) the Company is in breach of its obligation under the Rescission Agreement to obtain the written consent of Shaidim to such assignment and (ii) the Company is breach of its representations and warranties to Cantek and the Cantek Shareholders under the Exchange Agreement.
The Company was recently advised that on July 9, 2021 Shaidim signed an agreement with Fairway LLC, in which Shaidim expressly recognized that although it initially rejected the rescission agreement whereby Corette LLC undid its conveyance of Fairway to the Company, and the substitution of a Fairway note for the Note, Shaidim agreed to forego any such claims against the Company in favor of a cash settlement from Fairway. The Company was further advised that Shaidim was fully repaid in August 2021 and has no further claims of any nature in respect of the Note.
Kinetic Group Inc. is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing the business. All losses accumulated since Inception (June 6, 2014) have been considered as part of the Company’s development stage activities.
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.
The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.
For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Kinetic Group has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.
Patent, Trademark, License and Franchise Restrictions and Contractual Obligations and Concessions
We do not own, either legally or beneficially, any patents or trademarks.
Research and Development Activities
Other than time spent researching our proposed business we have not spent any funds on research and development activities to date. We do not currently plan to spend any funds on research and development activities in the future.
Compliance with Environmental Laws
We are not aware of any environmental laws that have been enacted, nor are we aware of any such laws being contemplated for the future, that impact issues specific to our business.
Employees
As of September 30, 2020 we had one employee and director - Aitan Zacharin, our chief executive officer and sole director. Our officers and directors are responsible for planning, developing and operational duties, and will continue to do so throughout the early stages of our growth.
Reports to Securities Holders
We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules for a small business issuer under the Securities Exchange Act of 1934. We are voluntarily subject to disclosure filing requirements including filing Form 10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other proxy and information statements from time to time as required. The public may read and copy any materials that we file with the Securities and Exchange Commission, (“SEC”), at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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ITEM 1A. RISK FACTORS
Item 1A. RISK FACTORS
Kinetic Group Inc. is a “Development Stage Company”. The Company has elected to early adopt Accounting Standards Update No.2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to the development Stage from its financial statements.
Kinetic Group Inc. is a Development Stage Company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing the business. All losses accumulated since Inception (June 6, 2014) have been considered as part of the Company’s development Stage activities.
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.
The amendments in this update remove the definition of Development Stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between Development Stage entities and other reporting entities from U.S. GAAP.
In addition, the amendments eliminate the requirements for Development Stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a Development Stage entity, (3) disclose a description of the Development Stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a Development Stage entity that in prior years it had been in the Development Stage.
For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Kinetic Group has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to Development Stage.
Kinetic Group Inc. is an “emerging growth company” under the Jumpstart Our Business Startups Act. We cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our shares of common stock less attractive to investors.
Kinetic Group Inc. is and will remain an “emerging growth company” until the earliest to occur of (a) the last day of the fiscal year during which its total annual revenues equal or exceed $1 billion (subject to adjustment for inflation), (b) the last day of the fiscal year following the fifth anniversary of its initial public offering, (c) the date on which Kinetic Group has, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (d) the date on which Kinetic Group is deemed a “large accelerated filer” (with at least $700 million in public float) under the Securities and Exchange Act of 1934.
For so long as Kinetic Group remains an “emerging growth company” as defined in the JOBS Act, it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” as described in further detail in the risk factors below. Kinetic Group cannot predict if investors will consider its shares of common stock less attractive because our reliance on some or all of these exemptions. If some investors find Kinetic Group’s shares of common stock less attractive as a result, the trading market for its shares of common stock may be less active, and its stock price may be more volatile.
If Kinetic Group avails itself of certain exemptions from various reporting requirements, its reduced disclosure may make it more difficult for investors and securities analysts to evaluate Kinetic Group and may result in less investor confidence.
The recently enacted JOBS Act is intended to reduce the regulatory burden on “emerging growth companies”. Kinetic Group meets the definition of an “emerging growth company” and so long as it qualifies as an “emerging growth company,” it will not be required to:
● have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
● submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, Kinetic Group is choosing to opt out of such extended transition period, and as a result, Kinetic Group will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that its decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Notwithstanding the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company”, at such time are we cease being an “emerging growth company”, we will be required to provide additional disclosure in our SEC filings. However, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2013; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports.
Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze the Company’s results of operations and financial prospects.
We lack an operating history. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, our business will fail.
We were incorporated on June 6, 2014, have generated, $[] in revenues from sales, and have incurred $[] in cost of revenue and $[] in operating expenses since our in inception. As of September 30, 2020, we had accumulated a deficit of $([]). We have a limited operating history upon which an evaluation of our future success or failure can be made. Based on current plans, we expect to continue generating revenues. However, our revenues may not be sufficient to cover our operating costs. We cannot guarantee that we will be successful in generating significant revenues in the future. Failure to achieve a sustainable sales level will cause us to go out of business.
If we encounter unforeseen difficulties with our business or operations in the future that require us to obtain additional working capital, and we cannot obtain additional working capital on favorable terms, or at all, our business may suffer.
To date, we have relied primarily upon cash from the private sale of equity securities and our operational activities.
We may encounter unforeseen difficulties with our business or operations in the future that may deplete our capital resources more rapidly than anticipated. As a result, we may be required to obtain additional working capital in the future through bank credit facilities, public or private debt or equity financings, or otherwise. We have not identified other sources for additional funding and cannot be certain that additional funding will be available on acceptable terms, or at all. If we are required to raise additional working capital in the future, such financing may be unavailable to us on favorable terms, if at all, or may be dilutive to our existing stockholders. If we fail to obtain additional working capital as and when needed, such failure could have a material adverse impact on our business, results of operations and financial condition. Furthermore, such lack of funds may inhibit our ability to respond to competitive pressures or unanticipated capital needs, or may force us to reduce operating expenses, which could significantly harm the business and development of operations. Because our independent auditors have expressed doubt as to our ability to continue as a “going concern,” as reported in their report on our financial statements, our ability to raise capital may be severely hampered. Similarly, our ability to borrow any such capital may be more expensive and difficult to obtain until this “going concern” uncertainty is resolved.
We face intense competition in our industry. If we are unable to compete successfully, our business will be seriously harmed.
The market for online marketing services is highly competitive and has low barriers to entry. Our competitors vary in size and in the variety of services they offer. Many of our current and potential competitors are well established and have longer operating histories, significantly greater financial and operational resources, and greater name and brand recognition than we have. As a result, these competitors may have greater credibility with both existing and potential customers. These competitors may be able to adapt more quickly to new or emerging online marketing technologies and changes in customer requirements. They also may be able to offer more products and more aggressively promote and sell their products. Our competitors may also be able to support more aggressive pricing than we will be able to, which could adversely affect sales, cause us to decrease our prices to remain competitive, or otherwise reduce the overall gross profit earned on our products.
We depend on key personnel.
We are currently relying on key individuals to continue our business and operations and, in particular, the professional expertise and services of Aitan Zacharin, our Chief Executive Officer and Director.
U.S. investors may experience difficulties in attempting to effect a service of process and enforce judgments based upon U.S. Federal Securities Laws against the company and its non U.S. resident officers and directors.
We are a Nevada corporation and, as such, are subject to the jurisdiction of the State of Nevada and the United States courts for purposes of any lawsuit, action or proceeding by investors herein. An investor would have the ability to effect service of process in any action on the company within the United States.
However, since Mr. Zacharin, our sole officer and director, resides outside the United States, substantially all or a portion of their assets are located outside the United States. As a result, it may not be possible for investors to:
● effect service of process within the United States against your non-U.S. resident officers or directors;
● enforce U.S. court judgments based upon the civil liability provisions of the U.S. federal securities laws against any of the above referenced foreign persons in the United States;
● enforce in foreign courts U.S. court judgments based on the civil liability provisions of the U.S. federal securities laws against the above foreign persons; and
● bring an original action in foreign courts to enforce liabilities based upon the U.S. federal securities laws against the above foreign persons.
We do not have a majority of independent directors on our Board and the Company has not voluntarily implemented various corporate governance measures, in the absence of which stockholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address the board of directors’ independence, audit committee oversight, and the adoption of a code of ethics. We have not yet adopted any of these other corporate governance measures and since our securities are not yet listed on a national securities exchange, we are not required to do so.
Our Board of Directors is comprised of one individual, who is also our executive officer. As a result, we do not have independent directors on our Board of Directors.
We have not adopted corporate governance measures such as an audit or other independent committee of our board of directors, as we presently do not have independent directors on our board. If we expand our board membership in future periods to include additional independent directors, we may seek to establish an audit and other committee of our board of directors. It is possible that if our Board of Directors included independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurance that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, at present in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages or employment contracts to our senior officers are made by a majority of directors who have an interest in the outcome of the matters being decided. However, as a general rule, the board of directors, in making its decisions, determines first that the terms of such transaction are no less favorable to us that those that would be available to us with respect to such a transaction from unaffiliated third parties. The company executes the transaction between executive officers and the company once it was approved by the Board of Directors.
Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.
None of the members of our Board of Directors are considered audit committee financial experts. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results. As a result, current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.
Members of our Board of Directors are inexperienced with U.S. GAAP and the related internal control procedures required of U.S. public companies. Management has determined that our internal audit function is also significantly deficient due to insufficient qualified resources to perform internal audit functions. Finally, we have not established an Audit Committee of our Board of Directors.
We are a development stage company with limited resources. Therefore, we cannot assure investors that we will be able to maintain effective internal controls over financial reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. For these reasons, we are considering the costs and benefits associated with improving and documenting our disclosure controls and procedures and internal controls and procedures, which includes (i) hiring additional personnel with sufficient U.S. GAAP experience and (ii) implementing ongoing training in U.S. GAAP requirements for our CFO and accounting and other finance personnel.
If the result of these efforts are not successful, or if material weaknesses are identified in our internal control over financial reporting, our management will be unable to report favorably as to the effectiveness of our internal control over financial reporting and/or our disclosure controls and procedures, and we could be required to further implement expensive and time-consuming remedial measures and potentially lose investor confidence in the accuracy and completeness of our financial reports which could have an adverse effect on our stock price and potentially subject us to litigation.
Because our current officer and director owns 89% of our outstanding common stock, he could make and control corporate decisions that may be disadvantageous to other minority shareholders and will be able to cause our company to engage in business combination without seeking shareholder approval.
Our current officer and director owns 89% of the outstanding shares of our common stock as of the date of this filing. Accordingly, they have a significant influence in determining the outcome of all corporate transactions or other matters, including mergers, consolidations and the sale of all or substantially all of our assets. They are able to exercise complete control over the company and have the ability to make decisions regarding, (i) whether to issue common stock and preferred stock, including decisions to issue common and preferred stock to themselves; (ii) employment decisions, including their own compensation arrangements, (iii) the appointment of all directors; and (iv) whether to enter into material transactions with related parties. The interests of our directors may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.
The Company is subject to the 15(d) reporting requirements under the Securities Exchange Act of 1934 which does not require a company to file all the same reports and information as a fully reporting company.
Until our common stock is registered under the Exchange Act, we will not be a fully reporting company, but only subject to the reporting obligations imposed by Section 15(d) of the Securities Exchange Act of 1934.
Pursuant to Section 15(d), we are required to file periodic reports with the SEC, such as annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, once this registration statement is declared effective, including the annual report on Form 10-K for the fiscal year during which the registration statement is declared effective. Our registration statement was declared effective on March 28, 2017, during the year ended September 30, 2017. That filing obligation will generally apply even if our reporting obligations have been suspended automatically under section 15(d) of the Exchange Act prior to the due date for the Form 10-K.
After that fiscal year and provided the Company has less than 300 shareholders, the Company is not required to file these reports. If the reports are not filed, the investors will have reduced visibility as to the Company and its financial condition.
In addition, as a filer subject to Section 15(d) of the Exchange Act, the Company is not required to prepare proxy or information statements; our common stock will not be subject to the protection of the going private regulations; the company will be subject to only limited portions of the tender offer rules; our officers, directors, and more than ten (10%) percent shareholders are not required to file beneficial ownership reports about their holdings in our company; that these persons will not be subject to the short-swing profit recovery provisions of the Exchange Act; and that more than five percent (5%) holders of classes of your equity securities will not be required to report information about their ownership positions in the securities.
We will not be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act until the end of the second fiscal year reported upon in our second annual report on form 10-K.
The Sarbanes-Oxley Act of 2002 and the new rules subsequently implemented by the Securities and Exchange Commissions, the Financial Industry Regulatory Authority (“FINRA”) and the Public Company Accounting Oversight Board have imposed various new requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These costs could affect profitability and our results of operations.
We are in the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404. We will not be required to conduct the evaluation of effectiveness of our internal controls until the end of the fiscal year reported upon in our second annual report on Form 10-K.
In addition, because we are a smaller reporting company, we are not required to obtain the auditor attestation of management’s evaluation of internal controls over financial reporting. If we obtain and disclose such reports we could continue doing so at our discretion so long as we remain a smaller reporting company.
This process of internal control evaluation and attestation may divert internal resources and will take a significant amount of time, effort and expense to complete. If it is determined that we are not in compliance with Section 404, we may be required to implement new internal control procedures and re-evaluate our financial reporting. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting or financial results, which could adversely affect our ability to comply with our periodic reporting obligations under the Exchange Act.
Risks Related to our Common Stock and this Offering
Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may likely prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in Kinetic Group Inc. will need to come through appreciation of the stock’s price.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described below, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock.
Our common stock was accepted for quotation on the OTC Bulletin Board and OTC Link during the year ended September 30, 2018. As a result, the application of the “Penny Stock” rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares. 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 market price of less than $5.00 per share or within 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:
- that a broker or dealer approve a person’s account for transactions in penny stocks; and
- 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.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
- obtain financial information and investment experience objectives of the person; and
- 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.
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.
You may face significant restrictions on the resale of your shares due to state “blue sky” laws.
Each state has its own securities laws, often called “blue sky” laws, which (1) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (2) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration. The applicable broker-dealer must also be registered in that state. We do not know whether our securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as market makers for our common stock. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your shares without the significant expense of state registration or qualification.
You could be diluted from our future issuance of capital stock and derivative securities.
As of September 30, 2020, we had [] shares of common stock outstanding and no shares of preferred stock outstanding. We are authorized to issue up to 75,000,000 shares of common stock and no shares of preferred stock. To the extent of such authorization, our Board of Directors will have the ability, without seeking stockholder approval, to issue additional shares of common stock or preferred stock in the future for such consideration as the Board of Directors may consider sufficient. The issuance of additional common stock or preferred stock in the future may reduce your proportionate ownership and voting power.
If a market develops for our shares, sales of our shares relying upon Rule 144 may depress prices in that market by a material amount.
As of September 30, 2020, 2,710,200 of the outstanding shares of our Common Stock are ‘‘unrestricted securities’’ within the meaning of Rule 144 under the Securities Act of 1933, as amended. As unrestricted securities, these shares may be resold under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws.
We intend to sell more restricted shares or securities convertible into restricted shares as part of our efforts to finance the Company’s operations. As a result of revisions to Rule 144, there is no limit on the amount of restricted securities that may be sold by a non-affiliate (i.e., a stockholder who has not been an officer, director or control person for at least 90 consecutive days) after the restricted securities have been held by the owner for a period of one year. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to registration of shares of Common Stock of present stockholders, may have a depressive effect upon the price of the Common Stock in any market that may develop.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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ITEM 2. PROPERTIES
Item 2. PROPERTIES
We do not hold ownership or leasehold interest in any property and pay our office rent on a monthly basis.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings, and we are not aware of any pending or potential legal actions.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
On August 27, 2018, our common stock was verified for trading on OTC Link ATS under the trading symbol KNIT. Prior to that time, there was no public market for our stock. The following table sets forth for the indicated periods the high and low intra-day sales price per share for our common stock on the OTC Link ATS for the year ended September 30, 2020.
High Low
First Quarter - * -
Second Quarter $ 1.05 $ 0.51
Third Quarter $ 2.05 $ 0.99
Fourth Quarter $ 2.35 $ 0.40
* There were no trades in our common stock during the relevant period.
Holders.
As of September 30, 2020, there were 50 record holders of 2,710,200 shares of the Company’s common stock.
Dividends.
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company’s business.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent sales of unregistered securities.
In August 2021, we transferred 21,000,000 shares to Aitan Zacharin as compensation for his ongoing service to the Company.
The above transactions were undertaken to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company. The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the years ended September 30, 2020 and 2019.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission.
Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or our behalf. We disclaim any obligation to update forward-looking statements.
Results of operations for the years ended September 30, 2019 and 2018.
Revenue
We generate revenue from sales of our marketing and web development services directly to small and medium-sized businesses. We acquire customers through direct telemarketing, referrals and our primary website that provides a description of our company and our service offerings (www.groupkinetic.com).
Our gross revenue from the provision of services for the years ended September 30, 2020 and 2019 was $0 and $10,350 respectively. Our cost of revenues for the year ended September 30, 2019 was $4,200 resulting in a gross income of $6,150.
Costs and Expenses
The major components of our expenses for the years ended September 30, 2020 and 2019 are outlined in the table below:
For the
Year Ended
September 30, 2020 For the
Year Ended
September 30, 2019 Increase
(Decrease)
Compensation - officers $ - $ 7,000 $ (7,000 )
Professional fees 31,572 17,850 13,722
General and administrative 3,797 18,541 (14,744 )
$ 35,369 $ 43,391 $ (8,022 )
The decrease in our operating costs for the year ended September 30, 2020, compared to our fiscal 2019, was due to a decrease in our corporate activities and expenses related to implementation of our business plan.
For the
Year Ended
September 30, 2020 For the
Year Ended
September 30, 2019
President, Chief Executive Officer $ - $ 5,600
Former President
-
Chief Financial Officer, Secretary and Treasurer - 5,600
$ - $ 11,200 *
* - During the year ended September 30, 2019, $4,200 of these related parties consulting services was recognized in cost of revenues and $7,000 in officers’ compensation within operating expenses.
Accounts Payable - Related Parties
As of September 30, 2020 and 2019 the Company owed its directors and officers $0 and $0 respectively.
Liquidity
Our internal liquidity is provided by our operations. During the years ended September 30, 2020 and 2019 the Company reported net loss from operations of $14,819 and $37,241, respectively.
To date we have financed our operations by cash generated from sales of our services and shares of our common stock. We were able to sustain our operations by increasing the number of our clients and providing additional services to our existing clients.
Since inception, we have sold 2,750,000 shares of common stock at $0.001 per share to our officers and directors for total proceeds of $2,750.
If we are not successful in expanding our clientele base, maintaining profitability and positive cash flow, additional capital may be required to maintain ongoing operations.
We have explored and are continuing to explore options to provide additional financing to fund future operations as well as other possible courses of action. Such actions include, but are not limited to, securing lines of credit, sales of debt or equity securities (which may result in dilution to existing shareholders), loans and cash advances from our directors or other third parties, and other similar actions. There can be no assurance that we will be able to obtain additional funding (if needed), on acceptable terms or at all, through a sale of our common stock, loans from financial institutions, our directors, or other third parties, or any of the actions discussed above. If we cannot sustain profitable operations, and additional capital is unavailable, lack of liquidity could have a material adverse effect on our business viability, financial position, results of operations and cash flows.
Cash Flows
The table below, for the period indicated, provides selected cash flow information:
For the
Year Ended
September 30, 2020 For the
Year Ended
September 30, 2019
Net cash used in operating activities $ (19 ) $ (41,527 )
Net cash used in investing activities - -
Net cash provided by financing activities - 35,798
Net increase (decrease) in cash $ (19 ) $ (5,729 )
We have generated revenues of $0 and $10,350 during the years ended September 30, 2020 and 2019, respectively. In addition, we received proceeds of $0 and $0 from sale of our common stock during the years ended September 30, 2020 and 2019. We had no other sources of cash inflow during the reporting periods.
Cash Flows from Operating Activities
Our cash used by operating activities as of September 30, 2020 of $19 (September 30, 2019: $41,527) is a net result of cash generated from sales of our marketing and web development services, and changes in our current assets and liabilities.
This portion of our cash flow represents the most significant, in addition to the offering proceeds and sale of unregistered stock, source of funding for our operations during the years ended September 30, 2020 and 2019. The major uses of our operating cash include acquisition of computer equipment and software, funding general operating expenses (professional fees, consulting, travel, office expenses and office rent) and cost of revenues.
Cash Flows from Investing Activities
We did not generate any cash from investing activities during the year ended September 30, 2020.
Cash Flows from Financing Activities
Not applicable.
Recent Accounting Pronouncements
See Note 2 to the Financial Statements.
Off Balance Sheet Arrangements
As of September 30, 2020 and 2019, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
KINETIC GROUP INC.
Index to the Financial Statements
Contents
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at September 30, 2020 and 2019
Consolidated Statements of Operations for the Years Ended September 30, 2020 and 2019
Consolidated Statement of Changes in Stockholders’ Deficit for the Years Ended September 30, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended September 30, 2020 and 2019
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Kinetic Group Inc
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Kinetic Group Inc (the “Company”) as of September 30, 2020, the related consolidated statements of operations, changes in shareholders’ equity and cash flows, for the year ended September 30, 2020, and the related notes collectively referred to as the “financial statements. The financial statement of Kinetic Group Inc. As of September 30, 2019, were audited by other auditors whose report dated December 12, 2019, expressed an unqualify opinion on those statement.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020, and the results of its operations and its cash flows for the year ended September 30, 2020, in conformity with U.S. generally accepted accounting principles.
Going Concern
The accompanying financial statements have been prepared assuming the company will continue as a going concern as disclosed in Note 3 to the financial statement, the Company has continuously incurred a net loss of $14,819 for the year ended September 30, 2020, and an accumulated deficit of $176,922 at September 30, 2020. The continuation of the Company as a going concern through September 30, 2020, is dependent upon improving the profitability and the continuing financial support from its stockholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due.
These factors raise substantial doubt about the company ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of the uncertainty.
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 audits. 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 audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion
OLAYINKA OYEBOLA & CO.
(Chartered Accountants)
We have served as the Company’s auditor since September 2020.
September 23rd, 2021.
Lagos Nigeria
KINETIC GROUP INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2020 September 30, 2019
ASSETS
Current Assets:
Cash $ - $ 19
Total current assets -
Total Assets $ - $ 19
LIABILITIES AND STOCKHOLDER’S EQUITY(DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities $ - $ 2,972
Client’s deposits - 2,050
Total current liabilities - 5,022
Total Liabilities - 5,022
Commitments and Contingencies
Stockholders’ Equity (Deficit):
Common stock, par value $0.001 per share, 75,000,000 shares authorized; 2,710,000 and 5,060,000 shares issued and outstanding as of September 30, 2020 and 2019 2,710 5,060
Additional paid-in capital 174,212 152,040
Accumulated deficit (176,922 ) (162,103 )
Total stockholders’ equity (deficit) - (5,003 )
Total Liabilities and Stockholder’s Equity (Deficit) $ - $ 19
The accompanying notes are an integral part of these consolidated financial statements.
KINETIC GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
September 30, 2020
Year Ended
September 30, 2019
Revenue $ - $ 10,350
Cost of revenue - 4,200
Gross profit - 6,150
Operating Expenses:
Compensation - officers - 7,000
Professional fees 31,572 17,850
Salaries - -
General and administrative 3,797 18,541
Total operating expenses 35,369 43,391
Income (Loss) from Operations (35,369 ) (37,241 )
Other income-cancelation of debt 20,550 -
Income (loss) before income tax provision (14,819 ) (37,241 )
Income tax provision - -
Net Income (Loss) $ (14,819 ) $ (37,241 )
Net Loss Per Common Share:
Net Loss per common share - Basic and Diluted $ (0.00 ) $ (0.00 )
Outstanding - Basic and Diluted 3,057,725 5,060,000
The accompanying notes are an integral part of these consolidated financial statements.
KINETIC GROUP INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
Common stock Additional
Paid-in Accumulated
Description Shares Amount Capital Deficit Total
Balance - September 30, 2018 5,060,000 $ 5,060 $ 99,017 $ (124,862 ) $ (20,785 )
Debt forgiven-related party - - 53,023 - 53,023
Net income (loss) - - - (37,241 ) (37,241 )
Balance - September 30, 2019 5,060,000 $ 5,060 $ 152,040 $ (162,103 ) $ (5,003 )
Debt forgiven-related party,net - -
19,822 - 19,822
Cancelation of shares -2,350,000 -2,350 2,350 - -
Net income (loss) - - - (14,819 ) (14,819 )
Balance - September 30, 2020 2,710,000 $ 2,710 $ 174,212 $ (176,922 ) $ -
The accompanying notes are an integral part of these consolidated financial statements.
KINETIC GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30, 2020 Year Ended September 30, 2019
Operating Activities:
Net loss $ (14,819 ) $ (37,241 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation - 1,609
Cancelation of debt and common shares 19,822 -
Changes in Operating Assets and Liabilities-
Accounts receivable - -
Prepaid expenses -
Accounts payable and accrued liabilities (2,972 ) (18,904 )
Accounts payable - related party - 11,200
Clients’ deposits (2,050 ) 2,050
Payroll taxes payable - (516 )
Net Cash Provided (Used) by Operating Activities (19 ) (41,527 )
Investing Activities:
Acquisition of property and equipment - -
Acquisition of software - -
Net Cash Used in Investing Activities - -
Financing Activities:
Cash advances - related party - 35,798
Net Cash Provided by Financing Activities - 35,798
Net Change in Cash (19 ) (5,729 )
Cash - Beginning of Period 5,748
Cash - End of Period $ - $ 19
Cash paid during the period for:
Interest $ - $ -
Income tax paid $ - $ -
Non-Cash Financing and Investing Activities:
Accrued compensation-officers-forgiven and contributed to capital $ $ 17,225
Restricted common stock canceled, and proceeds contributed to capital $ 2,350 $ -
Common stock issued for services $ - $ -
The accompanying notes are an integral part of these consolidated financial statements.
KINETIC GROUP INC.
NOTES TO THE SEPTEMBER 30, 2020 AND 2019 CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Operations
Kinetic Group Inc., a Nevada corporation, (the “Company”) was formed under the laws of the State of Nevada on June 6, 2014. Kinetic Group Inc. is a full service integrated digital marketing agency. The company offers a full range of web services, including web marketing services, social and viral marketing campaigns, search engine optimization consulting, custom web design, website usability consulting and web analytics implementation. The Company generate revenue from sales of its marketing services made directly to small and medium business customers.
On March 23, 2018, the Company formed a wholly owned subsidiary, Kinetic Development Inc., an Ontario, Canada Corporation (“KDI”). The subsidiary was incorporated to facilitate payroll transactions for the employees.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Principle of consolidation
The accompanying consolidated financial statements include all of the accounts of the Company as of September 30, 2020 and 2019. KDI is included as of September 30, 2019 and 2018 and for the period from March 23, 2018 (date of formation) through September 30, 2018. All intercompany balances and transactions have been eliminated.
Development Stage company
Kinetic Group Inc. is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company has recognized nominal amounts of revenue, it is still devoting substantially all of its efforts on establishing the business. All losses accumulated since Inception (June 4, 2014) have been considered as part of the Company’s development stage activities.
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.
The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.
For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Kinetic Group has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:
(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
(ii) Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.
(iii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry-forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors;
These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.
To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level
Pricing inputs that are generally observable inputs and not corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses, approximate their fair value because of the short maturity of those instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives, which range from five (5) years for computer equipment to seven (7) years for office furniture. Upon sale or retirement of office equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include: a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements.
The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned.
The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company derives its revenues from sales contracts with its customer with revenues being generated upon rendering of services. Persuasive evidence of an arrangement is demonstrated via invoice; service is considered provided when the service is delivered to the customers; and the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.
A right of return exists for customers’ retainers that were received prior to commencement of services. If a customer cancels a service contract subsequent to the commencement date, the customer is entitled to a refund, except for services already provided.
Income Tax Provision
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.
Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no unrecognized tax liabilities or benefits in accordance with the provisions of Section 740-10-25 at September 30, 2020 and 2019.
Earnings per Share
Earnings Per Share is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. Earnings per share (“EPS”) is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied.
Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260-10-55-23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.
There were no potentially debt or equity instruments issued and outstanding at any time during the years ended September 30, 2020 and 2019.
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, will have a material effect on the accompanying financial statements.
Note 3 - Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying financial statements, the Company had accumulated deficit at September 30, 2020, which raise substantial doubt about the Company’s ability to continue as a going concern.
The Company is attempting to generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to continue operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Note 4 - Property and Equipment
Property and equipment at September 30, 2019 and 2018 consisted of the following:
Estimated
Useful Lives
(Years)
September 30,
September 30,
Computer equipment $ 5,832 $ 5,832
Less accumulated depreciation
(5,832 ) (5,832 )
Computer equipment, net
- -
Software 2,495 2,495
Less accumulated amortization
(2,495 ) (2,495 )
Software, net
- -
Total property and equipment, net
$ - $ -
Depreciation expense
Depreciation expense for the year ended September 30, 2020 and 2019 was $0 and $1,609, respectively.
Note 5 - Related Party Transactions
Consulting services from President, Chief Executive Officer, Secretary and Treasurer and Chief Financial Officer
Consulting services provided by the Company’s officers for the years ended September 30, 2020 and 2019 were as follows:
For the
Year Ended
September 30, 2020
For the
Year Ended
September 30, 2019
President, Chief Executive Officer $ - $ 5,600
Chief Financial Officer, Secretary and Treasurer - 5,600
$ - $ 11,200 *
* - During the year ended September 30, 2019, $4,200 of these related parties consulting services was recognized in cost of revenues and $7,000 in officers’ compensation within operating expenses.
Debt Settlement
As of March 31, 2018 the Company owed to the Company’s officers, Mr. Yaroslav Startsev and Mr. Nikolai Kuzmin, $31,000 (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its officers. The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective March 31, 2018.
As of September 28, 2018 the Company owed to the Company’s former President, Mr. Timothy Barker, $26,451.61 (the “Debt”) for management consulting fees incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its President. The Company’s former President agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective September 28, 2018.
As of September 6, 2019 the Company owed to the Company’s officers, Mr. Yaroslav Startsev and Mr. Nikolai Kuzmin, $53,023 (the “Debt”) for cash advances of $35,798 and management consulting fees of $17,225 incurred by the Company in accordance with the effective Management Consulting Agreements between the Company and its officers. The Company’s officers agreed to donate the Debt to the Company’s contributed capital in full satisfaction of the Debt, effective September 6, 2019.
These Debt settlements improved the Company’s financial position and increased its working capital. The Company’s current and former officers released and forever discharged the Company, its successors and assigns from all manner of actions, suits, debts due, accounts, bonds, contracts, claims and demands whatsoever which against the Company they ever had or now have in connection to the Debt.
Note 6 - Stockholders’ Equity (Deficit)
Shares authorized
Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par value $0.001 per share.
Unregistered shares of common stock
In August 2015, the Company sold 2,750,000 shares of its common stock at par to its directors for $2,750 in cash.
On March 27, 2018 the Board of Directors of the Company approved the Stock Cancellation Agreements with Yaroslav Startsev (1,500,000 shares) and Nikolai Kuzmin (1,250,000 shares) canceling their shares with the Company in exchange for the Company agreeing to accept new subscription agreements. The Company retained the subscription funds paid by Yaroslav Startsev and Nikolai Kuzmin for the cancelled shares of Common Stock as contributed capital to the Company.
As of March 28, 2018, the Company received subscription agreements and subscription funds representing an aggregate of 1,300,000 shares of Common Stock from Yaroslav Startsev for $1,300 and 1,050,000 shares of Common stock from Nikolai Kuzmin for $1,050 which certificates shall bear an appropriate restricted legend under the Securities Act of 1933, as amended.
As of March 28, 2018 the Company also received a subscription agreement and subscription funds from Timothy Barker, former President of the Company, representing 400,000 shares of Common Stock for $400 which shall bear an appropriate restricted legend under the Securities Act of 1933 as amended.
The above transactions were undertaken to allow share ownership for all the officer and directors of the Company while no resulting in any dilution to the public shareholders or the Company. The above transactions were exempt under Section 4(a)2 of the Securities Act of 1933 as amended.
Registered shares of common stock
During the year ended September 30, 2017, the Company’s Registration Statement on the Form S-1 filed with the Securities and Exchange Commission was declared effective. In April 2017, the Company completed the sale of 2,030,000 shares of common stock at $0.0175 per share for total proceeds of $35,525 pursuant to this Registration Statement.
Regulation D Offering
On April 9, 2018 the Company filed with the Securities and Exchange Commission a notice of an exempt offering of the Company’s securities on the Form D (the “Offering”). The Company is offering 10,000,000 Shares under the Offering at a price of $0.02 per Share for an aggregate Offering price of US $200,000. The Securities are being offered by the Company through its officers and directors on a “best efforts” basis, pursuant to a non-public offering exemption from the registration requirements imposed by the Securities Act of 1933, under Regulation D, Rule 506, as amended (“1933 Act”). The Securities are not being registered and may not be sold unless they are registered under applicable Federal and State securities laws or an exemption from such laws is available.
This Offering was closed on August 21, 2018. The Company sold 180,000 shares of common stock for total proceeds of $3,600 pursuant to this Offering.
No additional shares of common stock were issued during the year ended September 30, 2019.
Note 7 - Income Tax
Deferred Tax Assets
At September 30, 2019 and 2018, the Company had net operating loss (“NOL”) carry-forwards for Federal income tax purposes of $176,922 and $162,103, respectively, that may be offset against future taxable income through 2035. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets of approximately $27,427, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance.
Components of deferred tax assets are as follows:
September 30,
September 30,
Net deferred tax assets - Non-current:
Expected income tax benefit from NOL carry-forwards $ 27,427 $ 24.315
Less valuation allowance (27,427 ) (24,315 )
Deferred tax assets, net of valuation allowance $ - $ -
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. The valuation allowance increased approximately $3,112 during the year ended September 30, 2020 and $5,585 during the year ended September 30, 2019.
Income Tax Provision in the Statements of Operations
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
For the
Year Ended
September 30, 2020
For the
Year Ended
September 30, 2019
Federal statutory income tax rate 15.0 % 15.0 %
Change in valuation allowance on net operating loss carry-forwards (15.0 )% (15.0 )%
Effective income tax rate 0.00 % 0.00 %
We follow ASC 740 Accounting for Uncertainty in Income Taxes. Under ASC 740, tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in our tax returns that do not meet these recognition and measurement standards. We had no liabilities for unrecognized tax benefits at September 30, 2020 and 2019.
Our policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. For the years ended September 30, 2020 and 2019, we did not recognize any interest or penalties in our statement of operations, nor did we have any interest or penalties accrued in our balance sheet at September 30, 2020 and 2019 relating to unrecognized tax benefits.
The tax years 2020-2019 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which we are subject.
Note 8 - Concentrations
Customers:
The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenue for the years ended September 30, 2020 and 2019.
For the
Year Ended
September 30, 2020
For the
Year Ended
September 30, 2019
Company A - % 19.08 %
Company B - % 33.82 %
Company C - % 19.32 %
Company D - % 13.29 %
Company E - % 14.49 %
Company F - % - %
Company G - % - %
Other Companies (less than 10% each) - % - %
100.00 % 100.00 %
Note 9 - Subsequent Events
In accordance with ASC 855-10 we have analyzed our operations subsequent to September 30, 2020 to September 28, 2021, date of these financial statement were issued, and have determined that we do not have any material subsequent events to disclose in these financial statements other than the events discussed below.
On March 24, 2020, KNIT entered into a rescission agreement (the “Rescission Agreement”) with Corette, LLC (“Corette”) pursuant to which (i) the acquisition of Solstice Marketing Concepts LLC (the “Acquisition”) was rescinded and rendered void ab initio (the “Rescission”); and (ii) the 26,349,800 shares received by Corette in connection with the Acquisition were transferred back to the Company for cancellation (collectively, the “Rescission”).
As a condition to the Rescission, Fairway, LLC, an affiliate of Corette (“Fairway”) assumed in full each of the convertible notes set forth below (the “Convertible Notes”). In connection with such assumption, the holders of such notes released the Company from any and all obligations arising under such Convertible Notes
Yuval Shani - $ 125,000
Suresh Mahtani - $ 400,000
Shaidim Enterprises, LLC - $ 1,200,000
Total = $ 1,725,000
(1) Pursuant to that certain Convertible Redeemable Note dated on or about November 20, 2019.
(2) Pursuant to that certain Convertible Redeemable Note dated on or about December 9, 2019.
(3) Pursuant to that certain Convertible Redeemable Note dated on or about December 23, 2019.
Pursuant to the Rescission Agreement, each of KNIT and Corette on behalf of itself and its respective partners, agents, assigns, heirs, officers, directors, employees, executors, and attorneys (“Affiliates”) forever and finally released, relieved, acquitted, absolved and discharged the other party and its Affiliates from any and all losses, claims, debts, liabilities, demands, obligations, promises, acts, omissions, agreements, costs and expenses, damages, injuries, suits, actions and causes of action, of whatever kind or nature, whether known or unknown, suspected or unsuspected, contingent or fixed, that they may have against the other party and its Affiliates, including, without limitation, claims for indemnification, based upon, related to, or by reason of any matter, cause, fact, act, or omission occurring or arising from the Acquisition; except for those arising from the Rescission Agreement, including, without limitation, in connection with the representations and warranties contained in the Rescission Agreement.
In connection with the Rescission, Corette agreed that certain payables owed by KNIT, including but not limited to, amounts owed to KNIT’s auditor, transfer agent, accountants, consultants, counsel and other service providers and any amounts owed under consulting, employment, service or similar agreements, will be assumed in full by Fairway, LLC, an affiliate of Corette.
Subject to a $50,000 limit, KNIT agreed in the Rescission Agreement to indemnify, defend, and hold harmless the Corette, Fairway, LLC, Nathan Rosenberg and Claudio Dotta (the “Corette Principals”) and their respective directors, managers, members, officers, shareholders, agents, representatives, successors, heirs and assigns (each, a “Corette Indemnified Party”) from and against all demands, claims, actions, causes of action, assessments, losses, damages, liabilities, costs and expenses, including, without limitation, interest, penalties and reasonable attorneys’ fees and expenses, directly asserted against, resulting to, imposed upon or incurred by a Corette Indemnified Party at any time after the date of the Rescission Agreement, by reason of, resulting from or in connection with: (i) any failure or breach by KNIT and officers, directors, shareholders, agents, representatives, successors and assigns to perform any of its covenants, agreements, or obligations under the Rescission Agreement; (ii) any inaccuracy or incompleteness of any of the representations and warranties of KNIT contained in the Rescission Agreement; (iii) any act and/or omission by KNIT, including, without limitation, any act taken, or any document executed, by Corette, and/or the Corette Principals, as applicable, as a member of the Board of Directors or officer of KNIT, or upon advice of KNIT’s counsel; or (iv) claims from or related to the Acquisition and the Rescission.
In connection with the transactions described above, effective March 24, 2020, Nathan Rosenberg resigned as Director, President and Chief Executive Officer of KNIT.
Effective March 24, 2020, Aitan Zacharin was appointed to KNIT’s Board of Directors and also as the President, Chief Executive Officer and to all other official positions of KNIT, respectively, in each case, for a term of three years and a director of KNIT until the next annual meeting.
As of March 24, 2020, KNIT, Cantek Holdings (2020) Ltd., an Israeli company (“Cantek”) and the shareholders of Cantek (the “Cantek Shareholders”) entered into a Share Exchange Agreement pursuant to which KNIT agreed to acquire 100% of the outstanding shares of Cantek in exchange for the issuance of 26,349,800 shares of common stock of KNIT to the Cantek Shareholders and KNIT’s commitment to issue 4,115,020 shares of preferred stock of the Company, each convertible into ten shares of Common Stock of KNIT to the Cantek Shareholders in the future (the “Exchange Agreement”).
The Exchange Agreement provided that, if (i) KNIT does not receive firm written commitments for investment not less than $15,000,000 on or before December 31, 2020, (ii) KNIT fails to file its quarterly and annual reports on forms 10-Q and 10-K (the “Reports”) for the 12-month period following the date hereof (not including any filings with respect to the period prior to the Closing Date which have not been completed as of the date hereof), (iii) any of the representations and warranties of KNIT shall have been untrue as of the date on which such representation or warranty was made or (iv) Chasdei Hashem Holdings Ltd, the primary shareholder of Cantek, and Aitan Zacharin mutually agree, the transactions contemplated by the Exchange Agreement may be reversed and will lose all force and effect, with the shares of Cantek reverting to the Cantek Shareholders and the Exchange Shares treated as though they were never issued by KNIT.
On November 1, 2020, KNIT entered into a Notice of Termination and Release agreement with Cantek Cantek and the shareholders of Cantek (the “Cantek Shareholders”) pursuant to which KNIT released any and all claims against Cantek, the Cantek Shareholders and other parties (the “Related Parties”) and the and KNIT agreed to indemnify Cantek and the Cantek Shareholders against any and all claims, losses, damages, fees, expenses that arise out of or are in any connected to its association with KNIT, including, but not limited to, the Exchange Agreement and Note (each as defined below) any indebtedness of KNIT.
On November 1, 2020, in accordance with the terms of the Exchange Agreement, KNIT and Cantek mutually agreed to immediately reverse the transactions thereunder. Under the Exchange Agreement, KNIT had agreed to acquire 100% of the outstanding shares of Cantek in exchange for the issuance of 26,349,800 shares of common stock of KNIT to the Cantek Shareholders and KNIT’s commitment to issue 4,115,020 shares of preferred stock of the Company, each convertible into ten shares of Common Stock of the Company to the Cantek Shareholders in the future (the “Exchange Agreement”) and reversed the transactions contemplated thereby. As a result, KNIT no longer has any ownership or other interest in Cantek and the Cantek Shareholders no longer have any ownership interest in KNIT.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
We evaluated the effectiveness of our disclosure controls and procedures as of the end of the 2019 fiscal year. This evaluation was conducted with the participation of our chief executive officer and our principal accounting officer.
Disclosure controls are controls and other procedures that are designed to ensure that information that we are required to be disclosed in the reports we file pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported.
Limitations on the Effective of Controls
Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but no absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of a control. A design of a control system is also based upon certain assumptions about potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Conclusions
Based upon their evaluation of our controls, the chief executive officer and principal accounting officer have concluded that, subject to the limitations noted above, the disclosure controls are effective providing reasonable assurance that material information relating to us is made known to management on a timely basis during the period when our reports are being prepared. There were no changes in our internal controls that occurred during the year covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls.
PART III

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ITEM 9B. OTHER INFORMATION

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table presents information with respect to our officers, directors and significant employees as of the date of this Report:
Name
Position
Aitan Zacharin
President, Chief Executive Officer,
Chief Financial Officer, Secretary, Treasurer and Director
The Director will serve as Director until our next annual shareholder meeting or until a successor is elected who accepts the position. Directors are elected for one-year terms. Officers hold their positions at the will of the Board of Directors, absent any employment agreement.
There are no arrangements, agreements, or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of Kinetic Group affairs.
Aitan Zacharin. Mr. Aitan Zacharin is Chief Executive Officer, Director of the Company. Mr. Zacharin is an experienced executive with a broad knowledge in building and managing technology and consumer products businesses. In 2012, he co-founded Fuse Science, an innovative biotechnology company headquartered in Miami, Florida. Mr. Zacharin was responsible for the development and growth of the business from a seed stage R&D company to a publicly traded CPG and biotech business with multiple subsidiaries. During his tenure he was tasked with expanding the biotechnology IP portfolio, spearheading multiple in vitro studies, and growing a successful consumer products business. In scaling the company, Mr. Zacharin identified and hired executive talent to lead the commercialization strategy including the past President of SC Johnson Company and previous CEO of Champs and Footlocker Sports. He successfully led the company to raise over $10M in three oversubscribed rounds, as well as negotiated contracts with 26 world renowned athlete and celebrity brand ambassadors, which included top ranked pro golfer Tiger Woods. Under Mr. Zacharins leadership the company developed and commercialized multicategory consumer products through a retail footprint of 15,000 stores including Walgreens and GNC. Since his exit from Fuse Science, he was advising and investing in mid to late stage technology startups, and assisting them with capitalization, business strategy and development, and accelerating growth.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11: EXECUTIVE COMPENSATION
Compensation of Officers
The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during 2020 and 2019 awarded to, earned by or paid to our executive officers.
Summary Compensation Table
(a) (b) (c) (d) (e) (f) (g) (h) (i) , (j)
Bonus Stock Awards Option Awards Non- Equity Incentive Plan Compen- sation Change in Pension Value & Non-quali- fied Deferred Compen- sation
Earnings
All Other Compen- sation Totals
Name and Principal* Position [1] Year ($)* ($) ($) ($) (S) ($) ($) ($)
Aitain Zacharin 0 []
[]
President, CEO 0 5,600 5,600
*Aitan Zacharin has acted as our chief executive officer and director since March 23, 2020, but has not received any compensation for such service or otherwise except for a one-time grant of 21,000,000 shares of our common stock in September 2021.
Narrative Disclosure Requirement for Summary Compensation Table
Compensation
Historically, the compensation for our current and former officers consisted of the payments made pursuant to the consulting agreements executed and previously filed with the Commission and incorporated herein by reference. For the years ended September 30, 2020 and 2019, the annual compensation was $0 and $0, to each Aitan Zacharin. We have not provided our named executive officers with perquisites or other personal benefits.
Retirement, Resignation or Termination Plans
We sponsor no plan, whether written or verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide payment for retirement, resignation, or termination as a result of a change in control of our company or as a result of a change in the responsibilities of an executive following a change in control of our company.
Directors’ Compensation
The persons who served as members of our board of directors, including executive officers, did not receive any compensation for services as directors for 2020 and 2019.
Option Exercises and Stock Vested
We do not have a stock option plan in place; therefore, there were no options issued, outstanding, exercised, or stock issued or vested as compensation during the years ended September 30, 2020 and 2019.
Pension Benefits and Nonqualified Deferred Compensation
The Company does not maintain any qualified retirement plans or non-nonqualified deferred compensation plans for its employees or directors.
Executive Officer Outstanding Equity Awards at Fiscal Year-End
The following table provides certain information concerning any common share purchase options, stock awards or equity incentive plan awards held by each of our named executive officers that were outstanding as of September 30, 2020.
Option Awards Stock Awards
Name Number of Securities Underlying Unexercised Options(#) Exercisable Number of Securities Underlying Unexercised Options(#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested Equity
Incentive Plan
Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
Yaroslav Startsev Chief Executive Officer, President - - - - - - - - -
Nikolai Kuzmin Chief Financial Officer, Treasurer Secretary - - - - - - - - -
Timothy Barker, former President - - - - - - - - -

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding beneficial ownership of our common stock as of September 30, 2020: (i) by each of our directors, (ii) by each of the Named Executive Officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person or entity known by us to beneficially own more than five percent (5%) of any class of our outstanding shares. As of September 30, 2020 there were 5,060,000 shares of our common stock outstanding:
Title of Class Name of Beneficial Owner Directors and Officers: Amount and Nature of Beneficial Ownership
(1)
Percentage of Beneficial Ownership
%
Common Aitan Zacharin, CEO, President and Director
Common All executive officers and directors as a group
(1) Applicable percentage of ownership is based on 5,060,000 shares of common stock outstanding on September 30, 2019.
Percentage ownership is determined based on shares owned together with securities exercisable or convertible into shares of common stock within 60 days of September 30, 2020, for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of September 30, 2020, 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. Our common stock is our only issued and outstanding class of securities eligible to vote.
As of September 30, 2020 there were 2,710,000 shares of common stock outstanding owned by our current and former officers and directors.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Consulting services provided by the Company’s officers for the years ended September 30, 2020 and 2019 were as follows:
For the
Year Ended
September 30, 2020
For the
Year Ended
September 30, 2019
President, Chief Executive Officer $ - $ 5,600
Former President
-
Chief Financial Officer, Secretary and Treasurer - 5,600
$ - $ 11,200 *
* - During the year ended September 30, 2019, $4,200 of these related parties consulting services was recognized in cost of revenues and $7,000 in officers’ compensation within operating expenses.
Accounts Payable - Related Parties
As of September 30, 2020 and 2019 the Company owed its directors and officers $0 and $0 respectively. These amounts represent unpaid consulting fees and cash advances as of the end of the reporting period.
Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his/her interest in a proposed transaction and will abstain from voting for or against the approval of such transaction.
Director Independence
Under NASDAQ rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation.
Our director, Yaroslav Startsev, is also our chief executive officer; our director Nikolai Kuzmin is also our chief financial officer. As a result, we do not have independent directors on our Board of Directors.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
During the years ended September 30, 2020 and 2019, we engaged [], as our independent auditor. For the years ended September 30, 2020, and 2019, we incurred fees as discussed below:
Year ended
September 30, 2020
Year ended September 30, 2019
Audit fees $ 0 $ 17,000
Audit - related fees Nil Nil
Tax fees
All other fees
Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements and review of our quarterly financial statements. Tax fees represent fees related to preparation of our corporation income tax returns.
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Under our audit committee’s policy, pre-approval is generally provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, the audit committee may also pre-approve particular services on a case-by-case basis. Our audit committee approved all services that our independent accountants provided to us in the past two fiscal years.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. EXHIBITS
EXHIBIT
NUMBER
DESCRIPTION
3.1
Articles of Incorporation. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.
3.2
Bylaws. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.
4.2
Subscription Agreement. Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.
10.1
Management Consultant Agreement (C.E.O). Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.
10.2
Management Consultant Agreement (C.F.O.). Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on February 14, 2017.
10.3
Service Agreement dated November 26, 2019 with Mark Radom. Incorporated by reference to the Company’s current report on Form 8-K dated November 27, 2019.
10.4
Warrant Assignment and Conveyance Agreement dated November 26, 2019. Incorporated by reference to the Company’s current report on Form 8-K dated November 27, 2019.
31.1
Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS
XBRL Instance Document **
101.SCH
XBRL Taxonomy Extension Schema Document **
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document **
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB
XBRL Taxonomy Extension Label Linkbase Document **
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document **
* Filed herewith.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.