ITEM 1BUSINESS
Business Development
Although our current name is Sichuan Leaders Petrochemical Company, we have been doing business since we were incorporated under the laws of the State of Florida on June 29, 2000, under the name Quality WallBeds, Inc. During our twelve (12) years of operation as a furniture retailer specializing in the design, construction, and installation of wall beds, closets and shelving, we had profits and losses. The Company has a single retail location in Saint Petersburg, Florida, and an office in Sarasota, Florida. The Company faces competition from local and nationally recognized firms in the areas of personnel experience, capitalization, and reputation. Therefore, the Company has concentrated its efforts on product quality, design technology, cost containment, customer relationships, and targeted advertising campaigns.
On March 30, 2012, the existing equity holders of the Company sold 100% of their holdings to unrelated parties; a change in ownership control occurred and Catherine Bradaick and Michael Daniels were appointed as new directors and named as President and Secretary/Treasurer, respectively.
On December 13, 2012 a Special Meeting of the Shareholders was held at the Corporate Offices (which attending shareholders represented approximately 79% of the outstanding shares) and Mr. Andy Z. Fan, Mr. Yakang Ai, Mr. Gary Macleod, and Ms. Diane J. Harrison became our new board of directors and officers.
Upon his appointment as Director and Chairman of the Board, Mr. Andy Z. Fan discussed a change is business strategy and business model for the Company due to the current economic conditions. Due to the downturn of the economy, our sales of wall beds have slowed. While we continue to operate as a wall bed sales and installation company, we have begun to pursue opportunities in the petrochemical industry in the Peoples Republic of China. Management believes that it has a fiduciary obligation to maintain shareholder value and as a result of this responsibility, management is exploring petrochemical products that it can utilize in its present operations as well as products that can be marketed to the public in general.
Mr. Fan requested that the full Board of Directors approve the addition of another product line for the company. He stated that to continue to protect and increase shareholder value, it would be to the advantage, welfare and best interests of the shareholders for the Company to consider alternative corporate strategies to generate new business revenue for the Company. Mr. Fan proposed pursuing business opportunities within the high-end lubricating oil research and development, production and sales.
After thorough discussion, the Shareholders unanimously agreed to the addition of a new line of products to the operations to increase revenues and shareholder value. In addition, the shareholders approved changing the Company name to Sichuan Leaders Petrochemical Company to reflect this new product line and target market in China, while continuing to do business under the fictitious name, Quality WallBeds, Inc. for its Florida wall bed operations.
In addition, in anticipation of increase in investors, the Shareholders unanimously voted to increase the capital stock of the company from five hundred million (500,000,000) to five billion (5,000,000,000).
Effective December 15, 2012, upon a unanimous vote of the Shareholders attending the December 13, 2012 Shareholder Meeting (which attending shareholders represented 79% of the outstanding shares), the Articles of Incorporation were amended to reflect these changes.
Our Business
(1) Principal Products and Their Markets
We provide Quality space saving custom home furniture and closet organizing systems to the general public. We currently offer our services to people and companies needing assistance in the organization of their living/work space.
We make use of our own website
www.qualitywallbeds.com
to target the typical individual that may be interested in our services in our target market area. We began using advertising in local publications and found this approach to be effective. Now, our advertising campaign consists primarily of the Internet and advertising in local publications in our larger markets.
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(2) Distribution Methods of Our Products
The primary delivery of our products is through client interviews at the clients location or an in store interview from our location. Our clients orders are then processed and sent to the manufacturer. When the completed order is received in our warehouse we then assign our current installer to install the product. Our sales are comprised of 95% client location and 5% in store interviews.
Clients call in from one of our advertising sources or from referral. Our former President, Catherine A Bradaick was responsible for screening all calls and arranging appointments with clients. When the design was completed, Ms. Bradaick received payment prior to product or services being ordered or performed. Once the order was taken the client is given a tentative timeframe for receiving of goods and installation.
The Company utilizes independent contractors to install the product at this time.
(3) Status of Any Publicly Announced New Product or Service.
We have not developed any new or unique products that would make us stand above our competition in the wall bed business. We are currently evaluating some petrochemical products manufactured in China to which we may be able to acquire the rights. At this time, the Company is in preliminary discussions with the manufacturer of the products to work together to market the petrochemical products, with any firm agreements contingent upon the results of the independent laboratory testing of the products.
(4) Our Competition
To compete effectively in our industry, a company must understand and then respond to the specific needs of the client. Many of our competitors have greater financial resources than we have, enabling them to finance acquisition and development opportunities or develop and support their own operations. In addition, many of these companies can offer additional product offerings not provided by us. Many also have greater name recognition. Our competitors may have the luxury of sacrificing profitability in order to capture a greater portion of the market. Consequently, we may encounter significant competition in our efforts to achieve our growth objectives. Our competitors have methods of operation that have been proven over time to be successful.
Since we are in a recessionary period our large competitors have chosen to advertise low prices in an effort to gain sales. In the past the company chose not to compete on a price basis and continued an advertising campaign based on quality. Our former President, Catherine A. Bradaick, had extensive experience in advertising and the company chose to compete by offering quality products and time sensitive installations as the main selling points of our services. The new advertising and approach by prior management was beginning to show results for increased revenue as reflected in our financial statements for the year ended December 31, 2012.
(5) Sources and Availability of Raw Materials
At this time we do not see a critical dependence on any supplier(s) that could adversely affect our operations. Other than manufacturers that may rely on raw materials in their production, we do not rely on the supply of any natural resources for our operations.
(6) Dependence on Limited Clients
We do not have any limitation on clients at this time other than the fact that we limit our geographical area to the State of Florida. Presently we are not soliciting business outside of the State of Florida. If we are able to expand our business we will expand our service area beyond Florida to cover a larger population base.
(7) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts
At the present time we do own the domain name
www.qualitywallbeds.com
. We may rely on certain trade secrets and know-how that are not patentable. Although we may take action to protect our unpatented trade secrets, in part, by the use of confidentiality agreements with our employees, consultants and certain of our contractors, we cannot guaranty that:
·
These agreements will not be breached;
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We would have adequate remedies for any breach; or
·
Our proprietary trade secrets and know-how will not otherwise become known or be independently developed or discovered by competitors.
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We cannot guaranty that our actions will be sufficient to prevent imitation or duplication of our products by others or prevent others from claiming violations of their trade secrets and proprietary rights.
(8) Need for Government Approval of Principal Products.
There are no federal or state approvals that are required for the specific products that we offer.
(9) Government Regulation
There are no federal or state regulations that require a special business license for our business however the City of St. Petersburg requires us to maintain a yearly business license. We are required to have a local business license as well as a sales tax exemption certificate. We are not required as a company to maintain workers compensation insurance and pay into the Florida unemployment compensation fund since we use independent contractors. When our new Officers and directors begin to receive a salary we will then have to apply for Workers Compensation insurance and pay into the Florida unemployment compensation fund.
As a Florida corporation we must file an annual report with the Department of State in Florida.
We are required to have a Finished Carpenters License to install the products within the City of St. Petersburg. We must insure that we have an individual with the appropriate license as the General Contractor license we have on file.
(10) Research and Development during Our Last Two Fiscal Years
During the last two fiscal years we do not know of any specific research and development that took place. Since the change in control on March 31, 2012 we have been researching the development of different products to be offered. The cost of our research and development of alternative products are limited and we do not feel the cost of developing additional products will have any significant impact on our profitability.
(11) Cost and Effects of Compliance with Environmental Laws
As a business we are not subject to federal, state or local environmental laws.
(12) Our Employees
As of December 31
st
, 2012, we have one (1) part-time sub-contractor who is working as our installer and our former President, Catherine A Bradaick is continuing to devote approximately 30 hours per week to Quality WallBeds at the request of the current Board of Directors.
Reports to Security Holders
We will be required to file reports and other information with the U.S. Securities and Exchange Commission (SEC) when our registration statement is effective and we are a fully reporting company. You may read and copy any document that we file at the SEC's public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about its public reference facilities. Our SEC filings will be available to you free of charge at the SEC's web site at <www.sec.gov>. We believe that we will be an electronic filer making our information available through an Internet site maintained by the SEC that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. This information may be found at
www.sec.gov
.
We are not required by the Florida Revised Statutes to provide annual reports. At the request of a shareholder, we will send a copy of an annual report to include audited financial statements. In the event we become a reporting company with the SEC, we will file all necessary quarterly and annual reports.
ITEM 1ARISK FACTORS
Before you invest in our common stock, you should be aware that there are risks, as described below. You should carefully consider these risk factors together with all of the other information included in this prospectus before you decide to purchase shares of our common stock. Any of the following risks could adversely affect our business, financial condition and results of operations. We have incurred both profits and losses from inception while realizing our revenues and we may never generate substantially more revenues or be profitable in the future.
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Risks Relating to Our Business
Economic events have adversely impacted our business and results of operations and may continue to do so.
Due to the continuing recession we believe that these weak general economic conditions will continue through the end of 2013 and most likely beyond. The ongoing impacts of the housing crisis, high unemployment and the rising prices of raw materials may further exacerbate current economic conditions that impact our business. As the economy struggles, our clients may become more apprehensive about the economy and/or related factors, and may reduce their level of discretionary spending. A decrease in spending due to lower consumer discretionary income or consumer confidence in the economy could impact the amount they spend thereby decreasing our revenues and negatively affecting our operating results. Additionally, we believe there is a risk that if the current negative economic conditions persist for a long period of time and become more pervasive, consumers might make long-lasting changes to their discretionary spending behavior on a more permanent basis.
The current industry downturn is negatively impacting our business with a revenue decline in fiscal 2012.
We had a loss from continuing operations, net of taxes of ($63,458) in fiscal year 2012 and in the fiscal year 2011 and small profit of $7,629. Our revenues decreased due to the weak economic environment. If the economic environment deteriorates further, or is prolonged, resulting in continued decreasing revenues and our actions to respond to these conditions are not sufficient, we could continue to see our revenues decrease and we would potentially suffer losses.
Changing discretionary spending patterns and general economic conditions could reduce our client traffic which would have an adverse effect on our revenues.
Purchases of our products are discretionary for our clients and, therefore, we are susceptible to economic slowdowns. We believe that the vast majority of our revenues are derived from working class families that must budget more closely than those with more disposable income. Accordingly, we believe that our business is particularly susceptible to any factors that cause a reduction in disposable income. We also believe that consumers generally are more willing to make discretionary purchases during periods in which favorable economic conditions prevail.
The future performance of the U.S. economy and global economies are uncertain and are directly affected by numerous global and national factors, in addition to other factors that are beyond our control. These factors, which also affect discretionary consumer spending, include among other items, international, national, regional and local economic conditions, disposable consumer income, consumer confidence, terrorist attacks and the United States participation in military actions. We believe that these factors have adversely impacted our business and, should these conditions continue, worsen or be perceived to be worsening or should similar conditions occur in the future, we would expect them to continue to adversely impact our business.
Many of the products we purchase and resell are commodities whose price is determined by the market's supply and demand for such products, and the markets in which we operate are cyclical and competitive. The depressed state of the housing, construction, and home improvement markets could continue to adversely affect demand and pricing for our products.
Many of the products we design and resell, including products made from oriented strand board, plywood, lumber, and particleboard, are commodities that are widely available from other producers or distributors with prices and volumes determined frequently in an auction market based on participants' perceptions of short-term supply and demand factors. At times, the price for any one or more of the products we purchase and resell may fall below cash production costs, requiring us to either incur short-term losses on product sales. Therefore, our profitability with respect to these commodity products depends, in significant part, on managing our cost structure. Commodity price volatility also affects our business, with falling price environments generally causing reduced revenues and margins, resulting in substantial declines in profitability and possible net losses.
Historically, demand for the products we design and resell, has been closely correlated with residential repair-and-remodeling activity our area and new residential construction and, to a lesser extent, light commercial construction. New residential construction activity remained substantially below average historical levels in 2011 and so did demand for the products we design and resell. There is significant uncertainty regarding the timing and extent of any recovery in such construction activity and resulting product demand levels as we move into the fiscal year 2013. Demand for new residential construction is influenced by seasonal weather factors, mortgage availability and rates, unemployment levels, household formation rates, domestic population growth, immigration rates, residential vacancy and foreclosure rates, demand for second homes, existing home prices, consumer confidence, and other general economic factors.
A material disruption at one of our suppliers manufacturing facilities could prevent us from meeting customer demand, reduce our sales, and/or negatively affect our financial results.
Any of our suppliers manufacturing facilities, or any of the machines within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including but not limited to:
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Equipment failure;
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Fires, floods, earthquakes, hurricanes, or other catastrophes;
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Unscheduled maintenance outages;
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Utility and transportation infrastructure disruptions;
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Labor difficulties;
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Other operational problems; or
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Ecoterrorism or threats of ecoterrorism.
Our growth depends on our ability to expand and operate profitably.
A substantial majority of our historical growth has been due to a thriving economy. When comparing fiscal 2012 to fiscal 2011, revenues increased modestly due to the slight improvement in the economy. Our ability to expand is dependent upon a number of factors, some of which are beyond our control, including but not limited to our ability to:
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find clients with disposable income;
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Competition;
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Consumer trends;
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General international, national and regional and local economic conditions;
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Our ability to execute our business strategy effectively;
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develop additional sources of marketing that are within our budgetary constraints;
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Raise, borrow or have available an adequate amount of money for expansion costs;
·
successfully promote our products and compete in the market in which we are located.
We may not be able to attract enough clients because potential clients may be unfamiliar with our company or our products might not appeal to them. As a result, the operating results generated at our store may not equal the operating results generated at our competitors.
Our existing senior personnel, management systems, financial controls, information systems and other systems and procedures may be inadequate to support any expansion, which could require us to incur substantial expenditures that could adversely affect our operating results.
Our company may not be able to compete successfully with other companies offering the same or equivalent products and, as a result, we may not achieve our projected revenue and profitability targets.
If our company is unable to compete successfully with other businesses in our existing market, we may not achieve our projected or historical revenue and profitability targets. Our industry is intensely competitive with respect to price, quality of service, store location, and whether our products are strictly offered in store or at the clients location. We compete with national chains and independently owned specialty store for clients, qualified management and other staff. Compared to our business, our competitors may have greater financial and other resources, have been in business longer, have greater name recognition and be better established in the market where our business is located.
Our success depends in part upon the continued popularity of space saving furniture.
Shifts in consumer preferences away from these types of products could materially adversely affect our operating results. The specialty furniture market is characterized by the continual introduction of new concepts and is subject to rapidly changing consumer preferences, tastes and purchasing habits. Our success depends in part on our ability to anticipate and respond to changing consumer preferences, as well as other factors affecting our industry, including new market entrants and demographic changes.
Continued expansion by our competitors could prevent us from realizing anticipated benefits from growth in our existing store revenue.
Our competitors have opened many businesses in recent years and a key element of our strategy is to expand our sales in our existing market. If we overestimate demand for our products or underestimate the popularity of our competitors, we may be unable to realize anticipated revenues from expansion in our current market. Similarly, if one or more of our competitors open new stores in our existing market revenues in our store may be lower than we expect. Any unanticipated slowdown in demand due to industry growth or other factors could reduce our revenue and results of operations, which could cause our revenue to decline substantially.
If we discover material weaknesses in the financial reporting of prior management it may cause us to restate our financial statements in the event such weaknesses are determined to not be acceptable to financial reporting requirements.
When new management took control on March 31, 2012 it had the responsibility to review the internal controls over financial accounting. While this review of material weaknesses is ongoing, if we discover any weaknesses that could cause us to have to restate
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our financial statements, this could cause us to expend additional funds that would have a material impact on our ability to generate profits and on the profits of past operations.
Taxing authorities may select to audit our federal or state tax returns from time to time, which may result in tax assessments and penalties that could have an adverse effect on our results of operations and financial condition.
We are subject to federal or state taxes in the U.S. Although we believe that our tax reporting is reasonable, if any taxing authority disagrees with the positions taken by the Company on its tax returns, we could have additional tax liabilities, including interest and penalties, which, if material, could have an adverse impact on our results of operations and financial condition.
We may experience higher operating costs, including increases in employee salaries, wages or benefits, which will adversely affect our operating results if we cannot increase our prices to cover them.
If we increase the compensation or benefits to our employees, we will have an increase in our operating costs. If we are unable or unwilling to increase our prices or take other actions to offset increased operating costs, our operating results will suffer. Factors that may affect the salaries or benefits that we pay to our existing or future employees include local unemployment rates and changes in minimum wage and employee benefits laws. Other factors that could cause our operating costs to increase include fuel prices, cost of gas and electricity, occupancy and related costs, maintenance expenditures and increases in other day-to-day expenses. In addition, various proposals that would require employers to provide health insurance for all of their employees are being considered from time-to-time in the U.S. Congress and various states. The imposition of any requirement that we provide health insurance to all employees would have an adverse effect on our operating performance.
Increases in the minimum wage could increase our labor costs. For example, under the Federal Minimum Wage Act of 2007, on July 24, 2009, the federal minimum wage increased to $7.25 per hour. The 2012 minimum wage in Florida is $7.67 per hour, effective January 1, 2012. For details, see Section 24, Article X of the State Constitution and Section 448.110, Florida Statutes. If we are unable to offset the increased labor costs by increasing our prices or by other means, this could have a material adverse effect on our business and results of operations.
Our operating results may fluctuate significantly due to the nature of our business and these fluctuations make it more difficult for us to predict accurately and address in a timely manner factors that may have a negative impact on our business.
Our business is subject to fluctuations that may vary greatly depending upon the region in which our particular store is located. These fluctuations can make it more difficult for us to predict accurately and address in a timely manner factors that may have a negative impact on our business. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year. In addition, in the past we have incurred, and in the future are likely to incur, a net loss in the second quarter due to the nature of our business, with revenues generally being less in the second quarter primarily due to our clients spending less on our products at the beginning of summer.
Our results of operations are affected by a variety of factors, including increased competition, and have fluctuated significantly in the past and can be expected to continue to fluctuate significantly in the future.
Our results of operations have fluctuated significantly in the past and can be expected to continue to fluctuate significantly in the future. Our results of operations are affected by a variety of factors, including:
·
the timing of business openings by competitors;
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changes in consumer preferences;
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general economic conditions;
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government regulation; and
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actions by our competitors.
Our store is located in a region that is susceptible to severe unemployment conditions. As a result, declining employment in this area could affect our business, resulting in fewer client visits to the store and otherwise have a material adverse impact on our business. It is our belief that you should not rely on our past results of operations as being indicative of the future.
Negative factors or publicity surrounding our industry could adversely affect consumer choice, which could reduce sales and make our business less valuable.
It is our belief that our competitive strengths include the quality of our employees, including our skilled carpenter and the quality of our management. Therefore we believe that adverse publicity relating to these factors or other similar concerns affects us more than it would competitors that compete primarily on other factors. Any shifts in consumer preferences away from the specialty products we offer; murphy beds, closet organizing systems and custom home office furniture including delivery and quick setup,
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whether because of negative publicity or an improving economy, would make our business less appealing and adversely affect our revenues. Adverse changes involving any of these factors could further reduce our client traffic and/or impose practical limits on pricing, which could further reduce our revenues and operating income.
We depend upon clients that want to use the services of a furniture store that specializes in the design, construction and installation of wall beds, closets and shelving, which subject us to the possible risk of a shortage of clients during periods of high employment.
Our ability to maintain consistent business depends in part upon our ability to acquire new clients. Our inability to gain new clients during periods of high employment could increase our costs and could cause a slowdown in business at our store or a temporary closure. If we temporarily close our business, we may experience a significant reduction in revenue during the time affected by the closure and thereafter, as our clients may change their habits of non-specialty furniture we risk permanent closure. We have no long-term contracts to provide our products to any large group or organization which could provide a stable client base.
The failure to enforce and maintain our intellectual property rights could enable others to use names confusingly similar to Quality WallBeds, Inc. and other names and marks used by our business, which could adversely affect the value of the Quality brand.
We have not registered the Quality WallBeds, Inc. mark used by our business as a trade name in Florida or any state or the United States Patent and Trademark Office. The success of our business depends on our continued ability to use our existing trade name in order to increase our brand awareness. In that regard, we believe that our trade name is valuable asset that is critical to our success. The unauthorized use or other misappropriation of our trade name could diminish the value of our business concept and may cause a decline in our revenue.
We occupy our business under a yearly non-cancellable lease and we may be unable to renew our lease at the end of its term.
Our business is located in leased premises. Our current lease is non-cancellable for a one (1) year period beginning on the June 1, 2012, and ending on June 1, 2013. The total annual rental of $15,187 is payable in monthly installments of $1,168 due on the first (1
st
) day of every month. If we are unable to renew our business lease, we may close or relocate our business, which could subject us to construction and other costs and risks, and could have a material adverse effect on our business and results of operations. For example, closing our business, even during the time of relocation, will reduce the sales that the business would have contributed to our revenues. Additionally, the revenue and profit, if any, generated at a relocated business may not equal the revenue and profit generated at the existing location.
Any new indebtedness may adversely affect our financial condition, results of operations, limit our operational and financing flexibility and negatively impact our business.
Any revolving credit facility, and other debt instruments we may enter into in the future, may have negative consequences to the Company, including but not limited to the following:
·
our ability to obtain financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired;
·
we may use a substantial portion of our cash flows from operations to pay interest on any new indebtedness, which will reduce the funds available to us for operations and other purposes;
·
our level of indebtedness could place us at a competitive disadvantage compared to our competitors that may have proportionately less debt;
·
our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited; and
·
our level of indebtedness may make us more vulnerable to economic downturns and adverse developments in our business.
We expect that we will depend primarily upon our operations to provide funds to pay our expenses and to pay any amounts that may become due under any new credit facility and any other indebtedness we may incur. Our ability to make these payments depends on our future performance, which will be affected by various financial, business, economic and other factors, many of which we cannot control.
We could face labor shortages that could slow our growth and adversely impact our ability to operate our business.
Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified salespeople necessary to keep pace with our anticipated increase in sales and meet the needs of our existing business. A sufficient number of qualified individuals of the requisite caliber to fill these positions may be in short supply. Any future inability to recruit and retain qualified individuals may delay our ability to increase the sales at our business. Any such delays, any material increases in employee turnover rate or any widespread employee dissatisfaction could have a material adverse effect on our business and results of operations.
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We depend on the services of key executives, the loss of any of these executives could materially harm our business and our strategic direction if we were unable to replace them with executives of equal experience and capabilities.
Our senior executives, are important to our success because they are instrumental in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, identifying expansion opportunities and arranging any necessary financing. Losing the services of these executives could adversely affect our business until a suitable replacement could be found. None of our key executives are not bound by employment agreements with us. We do not maintain key person life insurance policies on any of our executives.
We expect to incur substantial expenses to meet our reporting obligations as a public company. In addition, failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting and could harm our ability to manage our expenses.
Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel. We estimate that it will cost approximately $45,000 annually to maintain the proper management and financial controls for our filings. In addition, as a public company we are required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, so that our management can certify as to the effectiveness of our internal controls and our independent registered public accounting firm can render an opinion on the effectiveness of our internal controls over financial reporting, which requires us to document and test the design and operating effectiveness of our internal controls over financial reporting. If our management is unable to certify the effectiveness of our internal controls or if our independent registered public accounting firm cannot render an unqualified opinion on the effectiveness of our internal controls over financial reporting, or if material weaknesses in our internal controls are identified, or if we fail to comply with other obligations imposed by the Sarbanes-Oxley Act rules relating to corporate governance matters, we could be subject to regulatory scrutiny and a loss of public confidence, which could have a material adverse effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in our stock price and adversely affect our ability to raise capital.
Risks Relating to our Common Stock
Our future results may vary significantly in the future which may adversely affect the price of our common stock.
It is possible that our quarterly revenues and operating results may vary significantly in the future and that period-to-period comparisons of our revenues and operating results are not necessarily meaningful indicators of the future. You should not rely on the results of one quarter as an indication of our future performance. It is also possible that in some future quarters, our revenues and operating results will fall below our expectations or the expectations of market analysts and investors. If we do not meet these expectations, the price of our common stock may decline significantly.
We do not anticipate paying cash dividends for the foreseeable future, and therefore investors should not buy our stock if they wish to receive cash dividends.
No dividends were declared during 2012 and 2011. We have not paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
If we fail to continue to comply with the listing requirements of the OTCBB, the price of our common stock and our ability to access the capital markets could be negatively impacted.
Our common stock is currently listed on the OTCBB and the OTC Markets. We are subject to certain continued listing standards. We cannot provide any assurance that we will be able to continue to satisfy the requirements of the OTCBBs and the OTC Markets continued listing standards. A delisting of our common stock could negatively affect the price and liquidity of our common stock and could impair our ability to raise capital in the future.
Our stock price will be extremely volatile.
The trading price of our common stock will be subject to wide fluctuations in response to announcements of our business developments or those of our competitors, quarterly variations in operating results, and other events or factors. In addition, stock markets have experienced extreme price volatility in recent years. This volatility has had a substantial effect on the market prices of companies, at times for reasons unrelated to their operating performance. Such broad market fluctuations may adversely affect the price of our stock.
Because we can issue additional shares of common stock, purchasers of our common stock may incur immediate dilution and experience further dilution.
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We are authorized to issue up to 5,000,000,000 shares of common stock, of which 9,375,000 shares of common stock are issued and outstanding as of December 31, 2012. Our board of directors has the authority to cause us to issue additional shares of common stock, and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently, the stockholders may experience more dilution in their ownership of our stock in the future.
Since our securities are subject to penny stock rules you may have difficulty selling your shares.
Our shares of common stock are penny stocks and are covered by Section 12(g) of the 1934 Securities and Exchange Act which imposes additional sales practices which requires broker/dealers who sell Sichuan Leaders Petrochemical Companys securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and furnishing monthly account statements. For sales of our securities a broker/dealer must make a special suitability determination and receive from its client a written agreement prior to making a sale. The imposition of the foregoing additional sales practices could adversely affect a shareholders ability to dispose of his stock.
Our Amended and Restated Articles of Incorporation provide for one class of blank check preferred stock solely at the discretion of the Board of Directors.
Our Board of Directors may, at its sole discretion, issue stock from our authorized blank check preferred class. Shareholders do not have any control regarding the issuance of any shares from this class and may be adversely affected by any such issuance or subsequent sale in the form of dilution, voting, and value of their shares. The preferred shares may also be issued with preferences or rights that may adversely affect the holders of our common stock.
Since our Director and Chairman of the Board, Andy Z Fan, is our controlling shareholder, there may be a conflict of interest for Mr. Fan for our company and his other business interests.
Our Director and Chairman of the Board is our controlling shareholder who owns 6,950,020 shares of our common stock. Mr. Fan has the ability to control all business matters and he has clients from his other businesses that may cause a conflict with his acting independently regarding our company. Such a conflict of interest would likely cause investors to lose all or part of their investment.
At the present time our Officers and Directors provide their services on an unpaid basis and may not be able to continue their services without pay.
Since our company is not currently operating with earnings and cash flows to support Officer and director salaries, our Officers and Directors work on an unpaid basis. If and when the company has increased its operations to support salaries, we intend for our Officers/Directors to be compensated, which compensation will be adjusted annually based on individual performance and performance of the Company. Revenues and earnings, as well as sufficient cash flow, will be considered when determining when salaries may be available to our Officers and directors. Cash flows must be sufficient to meet the monthly cash needs of the business. Earnings are determined quarterly and will be analyzed along with our cash flows to determine if there is sufficient cash remaining after all expenses are paid to commence salaries for the officers and directors. Until then, there is a risk that our Officers and directors may need to find work elsewhere to supplement their income, distracting them from our operations resulting in poor quality control and a loss of clients and business.