Notes to Financial Statements
(Unaudited)
NOTE 1 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of
Business
On February 25, 2008, Advanced
Credit Technologies, Inc. (the "Company") was incorporated in the State of Nevada, that focuses on fraud prevention
and credit management
by using our TurnScor software platform.
The Company offers a proprietary
software platform branded as CyberloQ™ which is a banking fraud prevention technology that is offered to institutional clients
in order to combat fraudulent transactions and unauthorized access to customer accounts. Through the use of a customer’s
smart-phone, CyberloQ uses a multi-factor authentication system to control access to a bank card, transaction type or amount,
website, database or digital service.
In addition to CyberloQ,
the Company offers a proprietary software platform under the brand name Turnscor® which allows customers to monitor and manage
their credit from the privacy of their own homes.
Basis of Presentation
The accompanying unaudited
condensed financial statements have been prepared in accordance with United States of America generally accepted accounting principles
(“GAAP”) and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited
financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the
SEC on Form 10-K for fiscal year 2016.
In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial
position and the results of operations for the interim period presented have been reflected herein. Operating results for the
nine month period ending September 30, 2017 are not necessarily indicative of the results that may be expected for the full year.
On
July 28. 2017 the Company reported the following to the SEC. The Company has created a private limited company in the United Kingdom
named CyberloQ Technologies LTD. CyberloQ Technologies LTD is a wholly-owned subsidiary of the Company. Moving forward, any business
that the Company has in the United Kingdom will be transacted through CyberloQ Technologies LTD. The Company has had no operating
activity since inception. All inter-company transactions are elimination upon consolidation.
Reclassification
Certain reclassifications have
been made to conform previously reported data to the current presentation. These reclassifications have no effect on our net income
(loss) or financial position as previously reported.
Use of Estimates
In preparing these financial
statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance
sheets and revenues and expenses during the year reported. Actual results may differ from these estimates. The Company bases its
estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the
Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between
the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
Cash equivalents are
comprised of certain highly liquid investments with maturities of three months or less when purchased. The Company maintains its
cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses
related to this concentration of risk. As of September 30, 2017 and December 31, 2016, the Company had $0 in deposits in excess
of federally-insured limits.
Research and Development, Software
Development Costs, and Internal Use Software Development Costs
Software development
costs are accounted for in accordance with ASC Topic No. 985. Software development costs are capitalized once technological feasibility
of a product is established and such costs are determined to be recoverable. For products where proven technology exists, this
may occur very early in the development cycle. Factors we consider in determining when technological feasibility has been established
include (i) whether a proven technology exists; (ii) the quality and experience levels of the individuals developing the software;
(iii) whether the software is similar to previously developed software which has used the same or similar technology; and (iv)
whether the software is being developed with a proven underlying engine. Technological feasibility is evaluated on a product-by-product
basis. Capitalized costs for those products that are canceled or abandoned are charged immediately to cost of sales. The recoverability
of capitalized software development costs is evaluated on the expected performance of the specific products for which the costs
relate.
Internal use software
development costs are accounted for in accordance with ASC Topic No. 350 which requires the capitalization of certain external
and internal computer software costs incurred during the application development stage. The application development stage is characterized
by software design and configuration activities, coding, testing and installation. Training costs and maintenance are expensed
as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional
functionality.
In accounting for website
software development costs, we have adopted the provisions of ASC Topic No. 350. ASC Topic No. 350 provides that certain planning
and training costs incurred in the development of website software be expensed as incurred, while application development stage
costs are to be capitalized. During the
nine
months ending September 30, 2017 and 2016, we expensed
$44,284 and $141,325 expenditure on research and development, respectively.
During the nine months
ending September 30, 2017 and 2016,
we
have Capitalized external use software and
website development costs totaling $720,750 and $0, respectively. The purchase of CyberloQ from Carten Tech, consisted of $50,000
in cash, a $150,000 note payable by December 28, 2017, and a stock award of 4,000,000 shares with a fair market value of $520,000.
The Company estimated useful life of costs capitalized is evaluated for each specific project and ranges from six to fifteen years.
Advertising Expenses
Advertising costs are expensed
as incurred. Advertising expenses included in the Statement of Operations for the
nine
months
ending September 30, 2017 and 2016 is $0 and $0, respectively.
Fixed Assets
The Company records
its fixed assets at historical cost. The Company expenses maintenance and repairs as incurred. Upon disposition of fixed assets,
the gross cost and accumulated depreciation are written off and the difference between the proceeds and the net book value is
recorded as a gain or loss on sale of assets. The Company depreciates its fixed assets over their respective estimated useful
lives ranging from 3 to 5 years.
Intangible and Long-Lived
Assets
The Company follows
FASB ASC 360-10, "Property, Plant, and Equipment," which established a "primary asset" approach to determine
the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived
asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable
if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. For the three months
and
nine months
ending September 30, 2017 and 2016, the Company had not experienced impairment losses on its long-lived assets.
Revenue Recognition
The Company recognizes revenue
when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive
evidence of an arrangement, delivery has occurred, the sales price is fixed and determinable, and collectability is reasonably
assured. Determining whether some or all of these criteria have been met involves assumptions and judgments that can have a significant
impact on the timing and amount of revenue the Company reports.
Fair Value Measurements
For certain financial
instruments, including accounts receivable, accounts payable, accrued expenses, interest payable, advances payable and notes payable,
the carrying amounts approximate fair value due to their relatively short maturities.
The Company has adopted
FASB ASC 820-10, "Fair Value Measurements and Disclosures." FASB ASC 820-10 defines fair value, and establishes a three-level
valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The
carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial
instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of
such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy
are defined as follows:
-
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities
in active markets.
-
Level 2 inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially
the full term of the financial instrument.
-
Level 3 inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
The Company did not
identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value
in accordance with FASB ASC 815.
In February 2007,
the FASB issued FAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," now known as ASC
Topic 825-10 "Financial Instruments." ASC Topic 825-10 permits entities to choose to measure many financial assets and
financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are
reported in earnings. FASB ASC 825-10 is effective as of the beginning of an entity's first fiscal year that begins after November
15, 2007. The Company has adopted FASB ASC 825-10. The Company chose not to elect the option to measure the fair value of eligible
financial assets and liabilities.
Segment Reporting
FASB ASC 280, "Segment
Reporting" requires use of the "management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company for making operating decisions and assessing
performance. The Company determined it has one operating segment as of September 30, 2017 and December 31, 2016.
Income Taxes
Deferred income taxes
are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and
rates of the date of enactment.
When tax returns are
filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.
The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax
benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing
authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional
income taxes in the statements of operations.
Earnings (Loss) Per Share
Earnings per share is
calculated in accordance with the FASB ASC 260-10, "Earnings Per Share." Basic earnings (loss) per share is based upon
the weighted average number of common shares outstanding. Diluted earnings (loss) per share is based on the assumption that all
dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of
issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the
period.
At September 30, 2017
and
September 2016,
no potentially dilutive shares were outstanding.
The computation of earnings
per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.
Stock Based Compensation
The Company adopted FASB
ASC Topic 718 – Compensation – Stock Compensation (formerly SFAS 123R), which establishes the use of the fair value
based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair
value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services
are rendered. For stock based compensation the Company recognizes an expense in accordance with FASB ASC Topic 718 and values
the equity securities based on the fair value of the security on the date of grant. Stock option awards are valued using the Black-Scholes
option-pricing model.
The Company accounts
for stock issued to non-employees where the value of the stock compensation is based upon the measurement date as determined at
either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn
the equity instruments is complete.
Recent Accounting Pronouncements
In January 2016, the
FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which revises the accounting
related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair
value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated
with the fair value of financial instruments. The new guidance requires the fair value measurement of investments in equity securities
and other ownership interests in an entity, including investments in partnerships, unincorporated joint ventures and limited liability
companies (collectively, equity securities) that do not result in consolidation and are not accounted for under the equity method.
Entities will need to measure these investments and recognize changes in fair value in net income. Entities will no longer be
able to recognize unrealized holding gains and losses on equity securities they classify under current guidance as available for
sale in other comprehensive income (OCI). They also will no longer be able to use the cost method of accounting for equity securities
that do not have readily determinable fair values. Instead, for these types of equity investments that do not otherwise qualify
for the net asset value practical expedient, entities will be permitted to elect a practicability exception and measure the investment
at cost less impairment plus or minus observable price changes (in orderly transactions). The ASU also establishes an incremental
recognition and disclosure requirement related to the presentation of fair value changes of financial liabilities for which the
fair value option (FVO) has been elected. Under this guidance, an entity would be required to separately present in OCI the portion
of the total fair value change attributable to instrument-specific credit risk as opposed to reflecting the entire amount in earnings.
For derivative liabilities for which the FVO has been elected, however, any changes in fair value attributable to instrument-specific
credit risk would continue to be presented in net income, which is consistent with current guidance. For the Company, this standard
is effective beginning January 1, 2018 via a cumulative-effect adjustment to beginning retained earnings, except for guidance
relative to equity securities without readily determinable fair values which is applied prospectively. The Company is currently
assessing this ASU's impacts on the Company's consolidated results of operations and financial condition.
In March 2016, the FASB
issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting
Revenue Gross versus Net)”. The amendments in this ASU are intended to improve the operability and understandability of
the implementation guidance on principal versus agent considerations by amending certain existing
illustrative examples
and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition of
these amendments is the same as the effective date and transition of ASU 2014-09,
“Revenue
from Contracts with
Cu
st
o
m
ers
(
T
op
i
c 606
)
”
.
P
u
b
li
c e
n
titi
es
s
h
o
u
l
d
app
l
y
t
h
e
a
m
e
n
d
m
e
n
t
s
i
n
A
S
U
2014
-
09
f
or a
nnu
al
repor
ti
n
g per
i
ods
be
g
i
nn
i
n
g
a
f
t
er December 15, 2017, including interim
reporting periods therein. The Company is currently in the process of evaluating the impact of the adoption on its financial statements.
In August 2016, the
FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity
in practice in how certain cash receipts and payments are presented and classified in the statement of cash flows. The standard
provides guidance in a number of situations including, among others, settlement of zero-coupon bonds, contingent consideration
payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from
equity method investees. The ASU also provides guidance for classifying cash receipts and payments that have aspects of more than
one class of cash flows. For the Company, this ASU is effective January 1, 2018, with early adoption permitted. The standard requires
application using a retrospective transition method. The Company is currently assessing this ASU’s impact on its results
of operations and financial condition.
In November 2016,
the FASB issued ASU No. 2016-18, Restricted Cash, which clarifies guidance on the classification and presentation of restricted
cash in the statement of cash flows. Under the ASU, changes in restricted cash and restricted cash equivalents would be included
along with those of cash and cash equivalents in the statement of cash flows. As a result, entities would no longer present transfers
between cash/equivalents and restricted cash/equivalents in the statement of cash flows. In addition, a reconciliation between
the balance sheet and the statement of cash flows would be disclosed when the balance sheet includes more than one line item for
cash/equivalents and restricted cash/equivalents. For the Company, this ASU is effective January 1, 2018, with early adoption
permitted. Entities are required to apply the
standard’s
provisions on a retrospective
basis. The Company does not expect this ASU to have a material impact on the
Company’s
consolidated results of operations and financial condition.
NOTE 2 – GOING CONCERN
The
Company has incurred losses since Inception resulting in an accumulated deficit of $2,510,045 as of September 30, 2017 that includes
loss of $448,693 for the nine months ended September 30, 2017 and further losses are anticipated in the development of its business.
Accordingly, there is substantial doubt about the Company's ability to continue as a going concern. The accompanying financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result
from the outcome of this uncertainty.
The
ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining
the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come
due.
Management
anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses.
The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light
of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become
financially viable and continue as a going concern from the twelve month period after the financial statements are available to
be issued.
NOTE 3 – STOCKHOLDERS'
DEFICIT
Common Stock
The
Company has 100,000,000 shares of $.001 par value Common stock authorized as of September 30, 2017 and December 31, 2016. There
were 58,705,181 and 44,455,181 shares outstanding as of September 30, 2017 and December 31, 2016, respectively. The common stock
activity included the following: 14,250,000 shares were issued for the three quarters of 2017. Of this amount 500,000 shares were
issued for the retirement of the $150,000 debt
and
accrued interest, 4,000,000 shares were issued for the software acquired from Carten Tech LLC,it is noted that Carten Tech, LLC.
Is controlled by a related party. 200,000 Shares were issued for services obtained and 9,550,000 shares were purchased and issued
for $465,000.
Preferred
Stock
The
Company has 30,000 shares of $.001 par value Series A Super Voting Preferred Stock authorized as of September 30, 2017.
There were 30,000 shares of the Series A Super Voting Preferred Stock issued and outstanding as of September 30, 2017.
The holders of the shares of Series A Preferred Stock are entitled to Five-Thousand (5,000) votes per share, and such shares are
held by the Company's President, Vice-President, and Chief Technical Officer.
NOTE
4
– RELATED PARTY TRANSACTIONS
|
|
Related Party Loans
Payable
|
The following is a summary of related
party loans payable:
|
|
|
September
30,
2017
|
|
December
31, 2016
|
Liabilities
|
|
|
|
|
Loans
payable - stockholders
|
|
$
|
30,500
|
|
|
$
|
191,400
|
|
Loans
from related parties
|
|
$
|
150,000
|
|
|
$
|
0
|
|
The following is a summary of related party
loans payable:
Loans Payable -
Stockholders
On December 29, 2014,
the Company entered into a promissory note with a shareholder in the amount of $35,000. The promissory note is with flat interest
of $9,500 payable on maturity date and $167 a day after maturity date. The maturity date is 120 days after issuance of the note.
The note is currently default on September 30, 2017. The unpaid principal of the note is $30,500 on September 30, 2017 and December
31, 2016. Interest expense of the note is $45,389 and $47,215 for the nine months ended September 30, 2017 and 2016, respectively.
The Company also
issued stock option to the note holder to purchase 250,000 shares of the Company's common stock at $0.25 per share one year from
the issuance date of the promissory note. The fair value of the option grant estimated on the date of grant is $0 based on the
Black-Scholes option-pricing model. This option has expired.
On June 25
th
the Company entered into a promissory note with a shareholder in the amount of $150,000. The note matured on October 26,
2014. Interest expense on the note was
$0.00 and $0.00 for the nine months ended September 30, 2017 and 2016, respectively. In the third quarter of 2017, the Company
issued 500,000 shares of common stock to the shareholder in full and final payment of the note.
On October 26, 2013,
the Company entered into a promissory note with a shareholder in the amount of $150,000. The note matured on October 26, 2014.
In the third quarter of 2017, the Company issued 500,000 shares of common stock to the shareholder in full and final payment of
the note and realized a gain on settlement of $10,900.
Loans From Related
Parties
As part of the consideration
for the Company’s acquisition of the Cyberloq™ technology, the Company agreed to pay $150,000 within 150 days after
the closing, and a note in the amount of $150,000 was signed at closing. The note does not incur interest and matures on December
28, 2017.
NOTE
5 – CONVERTIBLE NOTES-STOCKHOLDERS
On
September 14, 2015, the Company issued a $10,000 convertible notes due on March 12, 2016 to its stockholder. The note bears no
interest and is convertible to 125,000 shares at the rate of $0.08 per share per the terms of the note. There was a beneficial
conversion feature associated with the note. The value of beneficial conversion feature is $1,250 and book as additional paid
in capital. The interest resulting from amortization of discount on notes is $0 and $521 for the nine months ended September 30,
2017 and 2016, respectively.
On
September 18, 2015, the Company issued a $8,990 convertible notes due on March 16, 2016 to its stockholder. The note bears no
interest and is convertible to 112,375 shares at the rate of $0.08 per share per the terms of the note. There was a beneficial
conversion feature associated with the note. The value of beneficial conversion feature is $2,248 and book as additional paid
in capital. The interest resulting from amortization of discount on notes is $0 and $937 for the nine months
ended September
30, 2017 and 2016, respectively.
On October 14, 2015, the Company issued a $8,000
convertible notes due on April 11, 2016 to its stockholder. The note bears no interest and is convertible to 80,000 shares at
the rate of $0.1 per share per the terms of the note.
All the above convertible notes were converted
to 337,375 shares on November 15, 2016.
NOTE 6 –
SUBSEQUENT EVENTS
The Company has evaluated subsequent events
through the date financial statements were issued. No events have occurred subsequent to September 30, 2017 that require disclosure
or recognition in these financial statements other than the fact subsequent to September 30, 2017.The Company sold an additional
725,000 shares from the end of the third quarter dated September 30, 2017 to Date of filing.
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
|
The
following discussion is intended to assist you in understanding our business and the results of our operations. It should be read
in conjunction with the Condensed Consolidated Financial Statements and the related notes that appear elsewhere in this report
as well as our Report on Form 10K filed with the Securities and Exchange Commission for the period ending December 31, 2016. Statements
made in this Form 10-Q that are not historical or current facts are "forward-looking statements". These statements often
can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate,"
"estimate," "approximate" or "continue," or the negative thereof. We wish to caution readers not
to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements
represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical
results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise
any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence
of anticipated or unanticipated events.
Company Overview
Advanced Credit Technologies
Inc. (“ACRT”, ‘We”or the “Company”) is a development stage technology company focused on fraud
prevention and credit management.
The
Company offers a proprietary software platform branded as CyberloQ™ . While previously the Company licensed CyberloQ, in
the third quarter of 2017, the Company acquired the CyberloQ technology and is now the exclusive owner of CyberloQ.
CyberloQ is a banking fraud
prevention technology that is offered to institutional clients in order to combat fraudulent transactions and unauthorized access
to customer accounts. Through the use of a
customer’s
smart-phone, CyberloQ
uses a multi-factor authentication system to control access to a bank card, transaction type or amount, website, database or digital
service. The mobile applications for CyberloQ have been built, and the Company is currently beta-testing the technology in the
banking ecosystem.
In addition to CyberloQ,
the Company offers a proprietary software platform under the brand name Turnscor
®
which allows customers to monitor and manage their credit from the privacy of their own homes. Although individuals can
sign-up for Turnscor on their own, the Company also intends to market Turnscor to certain institutional clients, where appropriate,
in conjunction with CyberloQ as a value-added benefit to offer their customers.
Liquidity, Capital
Resources and Material Changes in Financial Condition
The following table sets forth
our liquidity and capital resources as of September 30, 2017:
Cash and cash equivalents
|
$48,103
|
Total assets
|
$ 150,864
|
Total liabilities
|
$ 592,643
|
Total shareholders’deficit
|
$ (421,756)
|
As of September 30,
2017, our current assets were
$768,051 as compared to $31,776
in current assets as of December
31, 2016.
As
of September 30, 2017, our current liabilities were $346,295 as compared to $315,747 in current liabilities as of December 31,
2016.
As
of September 30, 2017, our total assets were $768,051 as compared to $31,776 in total assets as of December 31, 2016. This increase
in total assets is primarily due to the Company’s acquisition of the Cyberloq™ technology in the third quarter of
2017.
During
the nine months ended September 30, 2017, the Company received $465,000 of cash from financing activities compared to $291,275
for the nine months ended September 30, 2016.
The
Company does not currently have any revenues, and is reliant on its ability to raise additional capital to continue execution
of its business plan to move the Company forward towards profitability. If the Company does not generate sufficient revenues to
support its operations over the next twelve months, the Company will possibly need to raise additional capital by issuing capital
stock in exchange for cash in order to continue as a going concern.
We
believe that the
Company’s
minimum
capital
requirements for the next twelve months is $750,000. With $750,000, the Company is able to continue business operations and implement
its expansion model. The Company plans to raise these funds through either debt or equity financing. However, there are no agreements
to attain such financing in place at this time. The Company cannot assure any investor that, if needed, sufficient financing can
be obtained or, if obtained, that it will be on reasonable terms.
Results
of Operations for the Nine Months Ended September 30, 2017 and 2016
There
have been no material changes in the results of Company’s operations for the first and second quarters of 2017 as compared
to the first and second quarters of 2016.
Company
revenues were $0.00 in the nine months ended September 30, 2017, and as opposed to $2,400 for the nine months ended September
30, 2016.
During
the nine months ended September 30, 2017,
we
used $397,913 of cash for operating
activities compared to the use of $274,415 of cash for operating activities during the nine months ended September 30, 2016. The
additional operational expenses can primarily be attributed to a number of factors.
The Company paid officer
compensation of $214,474 during the nine months ended September 30, 2017 as opposed to
$192,155 during
the nine months ended September 30, 2016. This increase in officer compensation was due to the Company hiring its Chief Technology
Officer and issued 4,000,000 shares at a value of ($0.13) thirteen cents per share.
The
Company paid travel expenses of $71,384 during the nine months ended September 30, 2017 as opposed to $6,232 during the nine months
ended September 30, 2016. This increase in travel expenses was due to some officers of the Company making multiple sales trips
overseas.
The Company had a
depreciation expense of $20,008 as of September 30, 2017 compared to $0 during the nine months ended September 30, 2016. This
increase in depreciation was due to the Company’s acquisition of the CyberloQ™ technology.
The
foregoing increases in expenses were partially offset by a decrease in research and development costs. The Company paid research
and development costs of $44,284 during the nine months ended September 30, 2017 as opposed to $141,325 during the nine months
ended September 30, 2016. This decrease in research and development costs is primarily due to the fact that during 2016 the Company
incurred certain one-time costs associated with the build-out of the mobile applications for the CyberloQ
TM
technology.
In
light of the net increase in operating expenses for the nine months ended September 30, 2017 when compared to the nine month period
ended September 30, 2016, the Company experienced a net loss from operations of $448,693 for the nine months ended September 30,
2017 as compared to net loss from operations of $430,665 for the nine months ended September 30, 2016.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk.
The Company qualifies
as a smaller reporting company as defined by §229.10(f)(1) and therefore is not required to provide the information required
by this Item.
|
Item 4.
|
Controls and Procedures.
|
Our management is responsible
for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under
the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that
we
file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the
Commission’s
rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated to the
issuer’s
management, including its principal executive officer or officers and principal financial officer or officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An
evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design
and operation of our disclosure controls and procedures as of September 30, 2017. Based on that evaluation, our management concluded
that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed
in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial
reporting during the three-month period ended September 30, 2017 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART II -- OTHER
INFORMATION
|
Item 1.
|
Legal Proceedings.
|
The Company is not a party to any legal proceedings.
The Company qualifies
as a smaller reporting company as defined by §229.10(f)(1) and therefore is not required to provide the information required
by this Item. However, the Company does acknowledge that there are risks associated with the business of the Company. We will
be competing with a variety of companies, many of which have significantly greater financial, technical, marketing and other resources
than us. If
we
fail to attract and retain a large base of customers for our products,
or if our competitors establish a more prominent market position relative to ours, this will inhibit our ability to grow and successfully
execute our business plan. For example, Wells Fargo has introduced an "on/off”feature for their customers, Discover
Card has
“Freeze
It”functionality, and Ondot Systems has already been
operating in the mobile card security space for quite some time. However, the Company believes that the multi-purpose functionality
of CyberloQ, along with its multi-purpose applications will give the Company a distinct advantage by comparison. CyberloQ can
be used in the banking system to protect debit/credit cards, in the Health Care industry to protect PII ( Personal Identifying
Information ) now that medical records are kept digitally, and can protect corporate data bases in any industry from outside intrusion
via geo-fencing. The Company believes that these distinct features, along with the ability to
“White
Label”the
technology for marketing partners, give the Company a distinction in the marketplace, however There can
be no assurance that
we
will be able to successfully compete with other companies
in the marketplace.
|
Item 2.
|
Unregistered Sales of Equity Securities
and Use of Proceeds.
|
In the third quarter
of 2017, the Company raised $85,000 for the operations of the Company through the unregistered sale of 1,500,000 shares of common
stock.
In the third quarter
of 2017, the Company issued 500,000 shares of common stock to a shareholder in full and final payment a note that matured on October
26, 2014.
In the third quarter
of 2017, the Company issued 4,000,000 shares of common stock were issued in connection with the Company’s acquisition of
the CyberloQ™ technology
In the fourth quarter
of 2017, the Company issued 725,000 shares of common stock to four shareholders.
All of the shares
described above were issued by the Company in reliance upon an exemption from the registration requirements of the Securities
Act of 1933, as amended, provided by Section 4(2). All of the purchasers of the unregistered securities were all known to us and
our management, through pre-existing business relationships, as long standing business associates, friends, and employees. All
purchasers were provided access to all material information, which they requested, and all information necessary to verify such
information and were afforded access to our management in connection with their purchases. All purchasers of the unregistered
securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to us. All
certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer
of the certificates or agreements representing such securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition.
|
Item 3.
|
Defaults Upon Senior Securities.
|
The Company is in default with respect to
a note issued to a stockholder that matured on April 29, 2015. The balance of the principal of this note is $30,500. The interest
totaled $45,390 for the nine months ended September 30, 2017.
The Company is in default with respect to a note
issued to a stockholder that matured on October 26, 2014. The balance of this note plus accrued interest totaled $196,295 as of
September 30, 2017.
|
Item 4.
|
Other Information.
|
For the period covered
by this Form 10-Q, there was no information required to be disclosed in a report on Form 8-K that was not reported other than
the fact than the unregistered sale of 4,500,000 shares of the Company’s common stock on April 27, 2017 for a purchase price
$225,000 and 4,000,000 shares issued for the purchase of technology to Carten Tech LLC. There were no material changes to the
procedures by which security holders may recommend nominees to the Company’s board of directors.
Exhibit
|
Description
|
3.1(i)
|
|
Articles
of Incorporation*
|
3.2(i)
|
|
Amended
Articles of Incorporation dated May 4, 2010*
|
3.3(i)
|
|
Amended
Articles of Incorporation dated May 5, 2017**
|
3.4(ii)
|
|
By-Laws*
|
31.1
|
|
Rule
13a-14(a) / 15d-14(a) Certification of Principal Executive Officer & Principal Financial Officer.***
|
32.1
|
|
Section
1350 Certification of the Principal Executive Officer & Principal Financial Officer.***
|
101.1
|
|
Interactive
data files pursuant to Rule 405 of Regulation S-T.****
|
*
|
Incorporated
by reference through the Registration Statement on form S-1 filed with the Commission on October 26, 2010. (101141203)
|
**
|
Incorporated
by reference through the Quarterly Report on form 10-Q filed with the Commission on May 11, 2017. (17832815)
|
***
|
Filed
herewith. In addition, in accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not
filed.
|
****
|
Furnished
herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed 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.
|
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange
Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
ADVANCED
CREDIT TECHNOLOGIES, INC.
|
|
|
|
|
By:
|
/s/
Christopher Jackson
|
|
|
Christopher
Jackson
|
Date:
November 14, 2017
|
|
President, COO, Principal
Executive Officer and
Principal Financial Officer
|