Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
OptiLeaf Incorporated (“OptiLeaf”
or the “Company”) was incorporated in Florida in August 2014. The Company has been in the development stage since inception
and has not generated significant sales to date. The Company plans to develop, market and sell integrated software and hardware
to the agriculture industry for the seamless tracking and management of growth, task automation and sale of their clients’
products.
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.
generally accepted accounting principles have been condensed or omitted pursuant to such principles and regulations of the Securities
and Exchange Commission for Form 10-Q. All adjustments, consisting of normal recurring adjustments, have been made which, in the
opinion of management, are necessary for a fair presentation of the results of interim periods. The results of operations for such
interim periods are not necessarily indicative of the results that may be expected for a full year. The unaudited condensed financial
statements contained herein should be read in conjunction with the audited financial statements and notes thereto for the year
ended December 31, 2016.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with an original maturity of three months or less to be cash equivalents. At September 30, 2017 and December 31, 2016,
the Company had no cash equivalents.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ
from those estimates.
Property and Equipment
Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives (3 years) of the related assets using the straight-line depreciation method.
Maintenance and repairs are charged to
operations when incurred. Betterments and improvements are capitalized. When property and equipment are sold or otherwise disposed
of, the asset account and related accumulated depreciation account are reduced, and any gain or loss is included in operations.
Capitalized Software Development Costs
Software development costs are expensed
as incurred until technological feasibility of the product is established. Development costs incurred subsequent to technological
feasibility will be capitalized and amortized on a straight-line basis over the estimated economic life of the product. Capitalization
of computer software costs will be discontinued when the computer software product is available to be sold, leased, or otherwise
marketed. Amortization will begin when the product is available for release to customers. Management has determined as of September
30, 2017 that the software has not yet reached the stage of technical feasibility.
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Revenue Recognition
In general, the Company records revenue
when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price
to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria
for the various revenues streams of the Company:
Revenue is recognized at the time the product
is delivered or services are performed. Provision for sales returns will be estimated based on the Company’s historical return
experience. Revenue will be presented net of returns.
Allowance for Doubtful Accounts
The Company maintains an allowance for
doubtful accounts which represents its best estimate of probable losses inherent in the accounts receivable balance. The Company
evaluates specific accounts when it becomes aware of a situation where a customer may not be able to meet its financial obligations
due to deterioration of its liquidity or financial viability, credit ratings, or bankruptcy. The Company periodically adjusts this
allowance based upon its review and assessment of each category of receivables. As of September 30, 2017, the allowance for doubtful
accounts was $0.
Research and Development
The cost of research and development is charged to expense when
incurred.
Net Loss Per Common Share
Basic net loss per common share is calculated
using the weighted average common shares outstanding during each reporting period. Diluted net loss per common share adjusts the
weighted average common shares for the potential dilution that could occur if common stock equivalents (convertible debt and preferred
stock, warrants, stock options and restricted stock shares and units) were exercised or converted into common stock. There were
no common stock equivalents at September 30, 2017 and 2016.
Income Taxes
Deferred income taxes are recognized for
the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes at each year end, based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized when, based on
the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets
will not be realized. Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities.
Accounting Standards Codification
ASC
740, Income Taxes, requires a company to first determine whether it is more likely than not (which is defined as a likelihood of
more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming
that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets
this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty
percent likely to be realized upon effective settlement with a taxing authority.
The Federal and state income tax returns
of the Company for 2016, 2015 and 2014 are subject to examination by the internal Revenue Service and state taxing authorities
for three (3) years from the date filed.
Stock-Based Compensation
The Company accounts for equity instruments
issued to employees in accordance with
ASC
718, Compensation - Stock Compensation.
ASC
718 requires all share-based
compensation payments to be recognized in the financial statements based on the fair value using an option pricing model and is
recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant) using
the straight-line method.
ASC
718 requires forfeitures to be estimated at the time of grant and revised in subsequent periods
if actual forfeitures differ from initial estimates.
Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
Equity instruments granted to non-employees
are accounted for in accordance with
ASC
505, Equity. The final measurement date for the fair value of equity instruments
with performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant
disincentive for non-performance.
Fair Value of Financial Instruments
Pursuant to
ASC
No. 820, “Fair
Value Measurement and Disclosures”, the Company is required to estimate the fair value of all financial instruments included
on its balance sheets as of September 30, 2017 and December 31, 2016. The Company’s financial instruments consist of accounts
payable and accrued expenses. The Company considers the carrying value of such amounts in the financial statements to approximate
their fair value due to the short-term nature of these financial instruments.
Recent Pronouncements
In February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842),” which requires lessees to recognize most lease liabilities on their balance sheets but recognize
the expenses on their income statements in a manner similar to current practice. The update states that a lessee would recognize
a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset
for the lease term. The update is effective for interim and annual periods beginning after December 15, 2018, and early adoption
is permitted. The impact of this guidance will result in the recognition of assets and liabilities for leases that the Company
enters into in the future.
The FASB issued
ASC
606 as guidance
on the recognition of revenue from contracts with customers in May 2014 with amendments in 2015 and 2016. Revenue recognition will
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount,
timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption:
retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the
guidance recognized at the date of initial application (the cumulative catch-up transition method). The company will adopt the
guidance on January 1, 2018 and apply the cumulative catch-up transition method. The transition adjustment to be recorded to stockholders’
equity upon adoption of the new standard is not expected to be material.
Other recent accounting pronouncements
issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities
and Exchange Commission did not or are not believed by management to have a material impact on the Company’s financial position
or results of operations.
Note 2. GOING CONCERN
The Company’s financial statements
are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal
course of business.
The Company has experienced a loss from
operations during its development stage as a result of its investment necessary to achieve its operating plan, which is long-range
in nature. For the period from August 11, 2014 (inception) to September 30, 2017, the Company incurred a net loss of approximately
$656,000. In addition, the Company has just started revenue generating operations. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result
from this uncertainty.
The ability of the Company to continue
as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to
obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue
as a going concern for the next twelve months.
To meet these objectives, the Company continues
to seek other sources of financing in order to support existing operations and expand the range and scope of its business. However,
there are no assurances that any such financing can be obtained on acceptable terms and timely manner, if at all. The
failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending upon
the shortfall, the Company may have to curtail or cease its operations.
The accompanying unaudited condensed financial
statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have
to curtail operations or be unable to continue in existence.
Note 3. COMPUTER EQUIPMENT (NET)
Equipment is recorded at cost and consisted of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Computer equipment
|
|
$
|
10,514
|
|
|
$
|
10,514
|
|
Less: accumulated depreciation
|
|
|
(10,483
|
)
|
|
|
(7,854
|
)
|
|
|
$
|
31
|
|
|
$
|
2,660
|
|
Depreciation expense was $2,629 for the nine months ended September 30, 2017 and 2016.
Note 4. STOCKHOLDERS’ EQUITY
Common stock
The Company has authorized 100,000,000
shares of no par value common stock. At September 30, 2017, the number of shares of common stock issued and outstanding was 20,443,752.
The Company sold 233,333 shares of common
stock during the three months ended September 30, 2017 for $35,000.
Treasury stock
On September 20, 2016, the Board of Directors
authorized the Company to repurchase one million shares of common stock for $40,000. These treasury stock shares may at any time
be canceled upon the Board of Directors approval. The Board has not made such election.
Note 5. CONCENTRATION CREDIT RISK
The Company maintains its cash balances
in a local financial institution which at times may exceed the $250,000 amount insured by the Federal Deposit Insurance Corporation
(FDIC).
Note 6. COMMITMENTS AND CONTINGENCIES
The Company leases one of its offices in
a month to month arrangement. The monthly minimum lease payments are $1,144 plus a pro rata share of operating expenses. The other
office space monthly minimum lease payment is $677 per month and the lease expires on May 31, 2019.
Note 7. INCOME TAXES
The provision for income taxes differs
from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources
and tax effects of the differences are as follows:
Income tax provision at the federal statutory rate
|
|
|
15
|
%
|
Effect of operating losses
|
|
|
(15
|
)%
|
|
|
|
0
|
%
|
At September 30, 2017, the Company has
a net operating loss carryforward of approximately $656,000 for Federal and state purposes. This loss will be available to offset
future taxable income. If not used, this carryforward will begin to expire in 2034. The deferred tax asset relating to the operating
loss carryforward has been fully reserved at September 30, 2017 and December 31, 2016. The change in the valuation allowance was
approximately $233,000 and $95,000 respectively. The principal difference between the operating loss for income tax purposes and
reporting purposes is disallowed meals and entertainment and a temporary difference in depreciation expense.
Utilization of the Company’s net
operating losses may be subject to substantial annual limitation if the Company experiences a 50% change in ownership, as provided
by the Internal Revenue Code and similar state provisions. Such an ownership change would substantially increase the possibility
of net operating losses expiring before complete utilization.