Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
.
FORWARD-LOOKING STATEMENTS
This form 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as may, will, expect, believe, anticipate, estimate or continue or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include by are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.
Summary of Business
We are a consulting company for the small business enterprise market (hereinafter referred to as the SME Market). In general, SME Market companies range from sole proprietors the one-person operation with no employees to those companies that have up to 50 employees. We target those SME companies with limited resources and/or infrastructure looking to outsource all or part of their operations and/or corporate level functions. To get started, we recommend clients start with outsourcing one or more of these areas; financial and management reporting, accounting, tax reporting, legal and compliance, human resource management or sales and marketing (collectively our Business Services). We also look to help clients identify, implement and maintain business software products that are currently available in the marketplace that help streamline business operations through automation (our Managed Software Services). Our Business Services and Managed Software Services are collectively referred to as our Services.
Outsourcing has clearly becoming an integral part of a business strategy to achieve unparalleled performance. Packaged outsourcing takes it to the next level. Savvy business owners intent on guiding their companies toward optimized performance began by outsourcing a single process. That is the first step. Now, leading organizations are seeing the benefits from combining - or packaging - a comprehensive set of end-to-end processes across core functions into a single, outsourcing arrangement - for example, accounting, tax and risk management.
Bundled outsourcing also addresses the challenge of managing multiple providers and contacts. It is easier to manage and measure because it creates standardized, repeatable processes under one integrated governance structure that ensures maximum performance at lower sustained costs.
7
Our Market
Within the SME Market classification there are considerable company variation. There are hundreds if not thousands of types of small businesses. Just taking the NAICS (the North American Industry Classification System) or the SIC codes (the UK Standard Industrial Classification), there are over 1,000 classifications of business types from suppliers of asbestos products to X-ray apparatus. However, we try to collapse these many categories into three broad groups:
|
|
●
|
Companies that produce, manufacture or process things;
|
|
|
●
|
Companies that retail, distribute or merchant things; or
|
|
|
●
|
Companies that offer professional advice or knowledge-based services.
|
Within SME Market, we understand that the sole proprietor is very different to the company that employs 50 people. We believe enterprises experience a change of focus once they employ just a few people. Once an enterprise employs additional staff, we believe management begins to place more emphasis on the subject of revenue growth and expense management. At that point its critical that they have in place a solid foundation for supporting back-office and operating tasks, initially established through outsourcing such activities.
Our Opportunity
SME company owners and managers often are tasked with functioning in a number of capacities in order to grow their business. However, at some point in time in the growth curve (Figure 1), a business owner or manager is faced with the decision of continuing to function in a number of capacities or to seek outside assistance. To help with this decision, we bring outsourced people, business processes and software tools to businesses to reduce costs and to run more efficiently and effectively. We believe that if a small business doesnt embrace and leverage the power of outsourcing and automation, it significantly limits the companys ability to keep pace with business growth goals and objectives. As such, we believe that our Services met a large un-met need for SME companies.
The SME Market is particularly attractive because:
|
|
●
|
it is large, continues to grow and remains underserved by professional services companies; and
|
|
|
●
|
it typically has fewer in-house resources than larger businesses and, as a result, is generally more dependent on external resources;
|
Our Strategy
Our strategy for growing our operations includes:
|
|
●
|
Rolling out various outbound sales and marketing campaigns to grow our client base;
|
|
|
●
|
Expanding our outsourced third party provider base to assist in cost efficiently delivering our services; and
|
|
|
●
|
Growth through acquisition with complementary service providers and software product companies.
|
8
Plan of Operations
We plan to establish a broad customer base by various traditional and internet marketing campaigns.
Over the next twelve months we plan to;
-
continue to standardize the processes of how our consulting services are provided. In January 2017 we introduced our new 4-Part Total Business Management Approach. The approach breaks down clients businesses into 4 separate planning exercises;
1.
Business innovation and growth plan
2.
Risk management plan
3.
Capital funding plan
4.
Owner and employee wellness plan.
To support the delivery and manage the results of this approach we have developed a tool we refer to as our Business Innovation and Growth (BIG) Check-Up.
-
increase efforts to acquire new clients. We plan to do internet marketing that might include, search engine marketing, blogging, social media, affiliated marketing, organic and paid for search engine optimization. We may also employ certain traditional marketing tactics, including, mail, phone calls, content development, industry networking and direct selling. In February 2017, along with the launch of our new website we commenced our 1
st
major social media and internet marketing campaign.
-
Expand our custom program offerings. Along with the launch of our new website, we introduced some of the programs. That included, Healthcare Cost Containment, Cause-Related Marketing, Business Innovation & Growth (BIG) Boot Camps.
-
Refine through independent research and feed-back from clients, our database of what we consider best-in-class business software-as-a-service tools. We currently have database of approximately 100 such products.
-
Further explore the use of For-Cause Alliance Partnerships whereby we partner up with non-profit educational-like mission based organizations to further both business plans and reputation with the local community
Results of Operations
Summary of Key Results
For the years ended December 31, 2017 and 2016
Revenue and Cost of Revenues
Total revenue for the years ended December 31, 2017, and 2016 was $54,500, and $167,669, respectively. The primary reason for the decline in revenues was due to the shift in the Companys business to more of a packaged services model with small fees but recurring monthly payments rather than one-time project engagements.
9
Cost of revenues for the years ended December 31, 2017 and 2016 were $21,550 and $75,110, respectively. Such amounts included $14,050 and $43,650 paid to a related party, respectively.
The primary reason for the decline in cost of revenue was due to the shift in the Companys business to more of a packaged services model with small fees but recurring monthly payments rather than one-time project engagements and lower fees taken by the related party
Operating Expenses
Total operating and administrative expenses for the year ended December 31, 2017 and 2016 were $59,487 and $127,558, respectively. That amount included depreciation of $1,300 and $1,300, respectively and sales and marketing expenses of $2,393 and $11,259 respectively. The remaining amount primarily consists of professional services and reporting expenses. The Company recorded general and administrative costs of related party of $5,100 and $31,200, for the years ended December 31, 2017 and 2016, respectively. The Company recorded $1,640 in stock based compensation for the year ended December 31, 2016.
Liquidity and Capital Resources
At December 31, 2017, we had cash of $0 and a working capital deficit of $27,862. Since inception, we have raised $35,098 in equity capital. We had a total stockholders deficit of $27,212 and an accumulated deficit of $85,224 as of December 31, 2017.
We had $36,354 of cash used in and $6,401 of cash provided by operating activities for the years ended December 31, 2017 and 2016, respectively. These include a net loss of $28,986 and $34,999 respectively. Cash flows provided by (used in) operating activities included changes in operating assets and liabilities totaling $29,539 and $(8,669) for the years ended December 31, 2017 and 2016, respectively.
Our future growth in dependent upon achieving sales growth, management of operating expenses and ability of the Company to obtain the necessary financing to fund future obligations, and upon profitable operations.
As of December 31, 2017, our cash balance was $0. We believe we will require a minimum of $50,000 in additional cash over the next 12 months to maintain our regulatory reporting and filings and cover our operations costs. Should our revenues not increase as expected and if our costs and expenses prove to be greater than we currently anticipate, or should we change our current business plan in a manner that will increase or accelerate our anticipated costs and expenses, the depletion of our working capital would be accelerated. In the event that our revenues from operations are insufficient to meet our working capital needs, our major shareholder, Flemming Hansen, has indicated that he may be willing to provide funds required to maintain the reporting status in the form of a non-secured loan for the next twelve months as the expenses are incurred if no other proceeds are obtained by the Company. However, there is no contract in place or written agreement securing this agreement. Management believes if the Company cannot maintain its reporting status with the SEC it will have to cease all efforts directed towards the Company. As such, any investment previously made would be lost in its entirety.
Consistent with Section 144 of the Delaware General Corporation Law, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to us as a corporation as of the time it is authorized, approved or ratified by the board. We will conduct an appropriate review of all related party transactions on an ongoing basis.
With respect to shares issued for services, our board of directors determines the value of the services provided and authorizes the issuance of shares based upon the fair market value of our shares.
10
Off-Balance Sheet Arrangements
We had no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Critical Accounting Policies
Our discussion and analysis of the financial condition and results of operations are based upon the Companys financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts, inventory reserves and income taxes. These policies require that we make estimates in the preparation of our financial statements as of a given date.
Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
Revenue Recognition
The Company derives its revenue from the sale of compliance, legal, risk management and management and public reporting consulting services. The Company utilizes written contracts as the means to establish the terms and condition services are sold to customers.
Consulting Services
Because the Company provides its applications as services, it follows the provisions of Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition.
The Company recognizes revenue when all of the following conditions are met:
|
|
|
|
|
there is persuasive evidence of an arrangement;
|
|
|
the service has been provided to the customer;
|
|
|
the collection of the fees is reasonably assured; and
|
|
|
the amount of fees to be paid by the customer is fixed or determinable.
|
The Company recognizes revenue as services are performed.
Off-Balance Sheet Arrangements
We had no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Item 8. Financial Statements
11
RESULTS-BASED OUTSOURCING INC
(FORMERLY DIGITAL COMMERCE SOLUTIONS INC)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2017 AND 2016
12
RESULTS-BASED OUTSOURCING INC
(FORMERLY DIGITAL COMMERCE SOLUTIONS INC)
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 2017
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
Balance Sheets as of December 31, 2017 and 2016
|
|
F-3
|
|
|
|
Statements of Operations for the years ended December 31, 2017 and December 31, 2016
|
|
F-4
|
|
|
|
Statements of Stockholders Equity (Deficit) for the period from December 31, 2015 through December 31, 2017
|
|
F-5
|
|
|
|
Statements of Cash Flows for the years ended December 31, 2017 and December 31, 2016
|
|
F-6
|
|
|
|
Notes to Financial Statements
|
|
F-7
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Results Based Outsourcing Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Results Based Outsourcing Inc. (the Company) as of December 31, 2017 and 2016, and the related statements of operations, stockholders equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
These financial statements have been prepared assuming that the Company will continue as a
going
concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficiency as of December 31, 2017. These conditions raise substantial doubt about the Companys ability to continue as a
going
concern. Managements plans concerning these matters are described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Rosenberg Rich Baker Berman, P.A.
We have served as the Companys auditor since 2015.
Somerset, New Jersey
June 14, 2018
F-2
RESULTS-BASED OUTSOURCING INC
(FORMERLY DIGITAL COMMERCE SOLUTIONS INC)
BALANCE SHEETS
AS OF DECEMBER 31, 2017 AND 2016
|
|
|
|
|
ASSETS
|
|
December 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash or cash equivalents
|
|
$
-
|
|
$
11,354
|
Accounts receivable, net
|
|
-
|
|
10,500
|
TOTAL CURRENT ASSETS
|
|
-
|
|
21,854
|
|
|
|
|
|
Fixed assets, net
|
|
650
|
|
1,950
|
TOTAL ASSETS
|
|
$
650
|
|
$
23,804
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
-
|
|
$
16,401
|
Accrued taxes
|
|
250
|
|
250
|
Accrued interest
|
|
2,449
|
|
-
|
Due to shareholder
|
|
163
|
|
26,250
|
Note payable
|
|
25,000
|
|
-
|
TOTAL CURRENT LIABILITIES
|
|
27,862
|
|
42,901
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
27,862
|
|
42,901
|
|
|
|
|
|
Commitment & Contingencies
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' (DEFICIT):
|
|
|
|
|
Preferred stock, $.0001 par value, 15,000,000 shares authorized, none issued and outstanding
|
|
-
|
|
-
|
Common stock, $.0001 par value, 75,000,000 shares
|
|
|
|
|
authorized, and 4,107,000 issued and outstanding,
|
|
|
|
|
as of December 31, 2017 and 2016
|
|
411
|
|
411
|
Additional paid-in capital
|
|
57,601
|
|
36,730
|
Retained deficit
|
|
(85,224)
|
|
(56,238)
|
TOTAL STOCKHOLDERS' (DEFICIT)
|
|
(27,212)
|
|
(19,097)
|
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
$
650
|
|
$
23,804
|
The accompanying notes to financial statements are
an integral part of these statements.
F-3
RESULTS-BASED OUTSOURCING INC
(FORMERLY DIGITAL COMMERCE SOLUTIONS INC)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
|
|
|
|
|
Year Ended December 31, 2017
|
Year Ended December 31, 2016
|
|
|
|
|
Revenues:
|
|
|
|
Professional service revenues
|
|
$
54,500
|
$
166,478
|
Client expense reimbursement
|
|
-
|
1,191
|
Total Revenues
|
|
54,500
|
167,669
|
|
|
|
|
Cost of revenues
|
|
7,500
|
31,460
|
Cost of revenues from a related party
|
|
14,050
|
43,650
|
Gross Profit
|
|
32,950
|
92,559
|
|
|
|
|
Operating expenses:
|
|
|
|
Marketing and sales
|
|
2,393
|
11,259
|
General and administrative
|
|
51,994
|
85,099
|
General and administrative costs from a related party
|
5,100
|
31,200
|
Total operating expenses
|
|
59,487
|
127,558
|
|
|
|
|
Net Loss from operations
|
|
(26,537)
|
(34,999)
|
|
|
|
|
Other expenses
|
|
|
|
Interest expense
|
|
2,449
|
-
|
Total other expenses
|
|
2,449
|
-
|
|
|
|
|
Net Loss before taxes
|
|
(28,986)
|
(34,999)
|
|
|
|
|
Net Loss applicable to common shareholders
|
|
(28,986)
|
$
(34,999)
|
|
|
|
|
Net loss per share - basic and diluted
|
|
($0.01)
|
($0.01)
|
|
|
|
|
Weighted number of shares outstanding -
|
|
|
|
Basic and diluted
|
|
4,107,000
|
4,096,666
|
The accompanying notes to financial statements are an integral part of these statements.
F-4
RESULTS-BASED OUTSOURCING INC
(FORMERLY DIGITAL COMMERCE SOLUTIONS INC)
STATEMENT OF STOCKHOLDERS' EQUITY(DEFICIT)
FOR THE PERIOD FROM DECEMBER 31, 2015
THROUGH DECEMBER 31, 2017
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
Common
|
|
Paid-In
|
Retained
|
Stockholders'
|
|
Shares
|
Par Value
|
Shares
|
Par Value
|
Capital
|
(Deficit)
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
Balance December 31, 2015
|
-
|
$
-
|
4,025,000
|
$
403
|
$
35,098
|
$
(21,239)
|
$
14,262
|
|
|
|
|
|
|
|
|
Net loss for period
|
-
|
-
|
|
|
|
(34,999)
|
(34,999)
|
Stock based compensation
|
|
|
82,000
|
8
|
1,632
|
|
1,640
|
|
|
|
|
|
|
|
|
Balance December 31, 2016
|
-
|
$
-
|
4,107,000
|
$
411
|
$
36,730
|
$
(56,238)
|
$
(19,097)
|
|
|
|
|
|
|
|
|
Forgiveness of majority shareholder's debt with sale
|
|
|
|
|
20,871
|
|
20,871
|
Net loss for period
|
-
|
-
|
|
|
|
(28,986)
|
(28,986)
|
|
|
|
|
|
|
|
|
Balance December 31, 2017
|
-
|
$
-
|
4,107,000
|
$
411
|
$
57,601
|
$
(85,224)
|
$
(27,212)
|
The accompanying notes to financial statements are an integral part of these statements.
F-5
RESULTS-BASED OUTSOURCING INC
(FORMERLY DIGITAL COMMERCE SOLUTIONS INC)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net loss
|
|
$
(28,986)
|
|
$
(34,999)
|
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
-
|
|
1,640
|
Depreciation
|
|
1,300
|
|
1,300
|
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
Accounts receivable
|
|
10,500
|
|
(10,500)
|
Due to shareholder
|
|
(20,835)
|
|
39,250
|
Prepaid expenses
|
|
-
|
|
5,000
|
Accounts payable and accrued expenses
|
|
(783)
|
|
4,710
|
Accrued interest expense
|
|
2,449
|
|
-
|
Net cash provided by (used in) operating activities
|
|
$
(36,354)
|
|
$
6,401
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from issuance of note payable
|
|
25,000
|
|
-
|
|
|
$
25,000
|
|
-
|
Net cash provided by financing activities
|
|
|
|
|
NET INREASE (DECREASE) IN CASH
|
|
(11,354)
|
|
6,401
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS at beginning of year
|
|
11,354
|
|
4,953
|
CASH AND CASH EQUIVALENTS at end of year
|
|
$
(0)
|
|
$
11,354
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
Cash paid for:
|
|
|
|
|
Interest
|
|
$
-
|
|
$
-
|
Income Taxes
|
|
$
-
|
|
$
-
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities
|
|
|
|
Sale of majority shareholder's stock
|
|
$
20,871
|
|
$
-
|
Stock based compensation
|
|
$
-
|
|
$
1,640
|
The accompanying notes to financial statements are an integral part of these statements.
F-6
RESULTS-BASED OUTSOURCING INC (FORMERLY DIGITAL COMMERCE SOLUTIONS INC)
NOTES TO FINANCIAL STATEMENTS
Note 1. The Company History and Nature of the Business
Results-Based Outsourcing Inc. (formerly Digital Commerce Solutions Inc) (the Company), formed on July 22, 2013, is engaged in providing a variety of out-sourced business services which include; accounting and bookkeeping, marketing, document storage, staffing, recruiting and personal executive organization (collectively, the Services). The Services are grouped into two offerings; (i) Business Process Outsourcing (BPO), and (ii) Software Managed Outsourcing (SMO). BPO services brings people and process to a clients business that can ranged from providing a entire back office to individual projects. SMO services bring software tools to a clients business to help them run more efficiently and effectively.
On October 30, 2017, Mountain Laurel Holdings, Inc (MHL), the Companys then majority shareholder, and three affiliates, sold their stock, 3,500,000 and 37,500, respectively, collectively representing 86.1% of the Company, to Flemming J.H Hansen (Hansen). Along with the Transaction, the sole owner of MHL, the then sole officer and director resigned in all capacities and Hansen became the sole officer and director.
The financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. Since inception, the Company has a retained deficit of $85,224 and has a working capital deficit of $27,862 at December 31, 2017. Although we are generating revenue, our growth is dependent upon achieving sales growth, management of operating expenses and ability of the Company to obtain the necessary financing to fund future obligations and pay liabilities arising from normal business operations when they come due, and upon profitable operations.
Management has concluded that due to the conditions described above, there is substantial doubt about the entitys ability to continue as a going concern through June 14, 2018. We have evaluated the significance of these conditions in relation to our ability to meet our obligations and believe that we may need to either borrow funds from our majority shareholder or raise additional capital through equity or debt financings. We expect our current majority shareholder will be willing and able to provide such additional capital. However, we cannot be certain that such capital (from our shareholders or third parties) will be available to us or whether such capital will be available on terms that are acceptable to us. Any such financing likely would be dilutive to existing stockholders and could result in significant financial operating covenants that would negatively impact our business. If we are unable to raise sufficient additional capital on acceptable terms, we will have insufficient funds to operate our business or pursue our planned growth.
Note 2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. The Companys cash and cash equivalents are located in a United States bank. The Company does not have any cash equivalents as of December 31, 2017 or December 31, 2016.
F-7
Accounts Receivable
The Companys accounts receivable are derived from direct customers. Collateral is not required for accounts receivable. The Company maintains an allowance for potential credit losses as considered necessary. The Company performs ongoing reviews of all customers that have breached their payment terms or for whom information has become available indicating a risk of non-recoverability. The Company records an allowance for bad debts for specific customers identified as well as an allowance based on its historical collection experience. The Companys evaluation of the allowance for potential credit losses requires the use of estimates and the actual results may differ from these estimates. At December 31, 2017 and 2016, the allowance for potential credit losses was $0.
Fixed Assets
Office equipment is stated at cost and depreciated over three years using the straight line method of accounting. For the year end December 31, 2017, and 2016 the Company recorded depreciation expense of $1,300 and $1,300, respectively.
Revenue Recognition
The Company derives its revenue from the sale of compliance, legal, risk management and management and public reporting consulting services. The Company utilizes written contracts as the means to establish the terms and condition services are sold to customers.
Consulting Services
Because the Company provides its applications as services, it follows the provisions of Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition.
The Company recognizes revenue when all of the following conditions are met:
|
|
●
|
there is persuasive evidence of an arrangement;
|
●
|
the service has been provided to the customer;
|
●
|
the collection of the fees is reasonably assured; and
|
●
|
the amount of fees to be paid by the customer is fixed or determinable.
|
The Company recognizes revenue as services are performed or monthly based upon contract terms. Contracts may either be for a specific project, or, a monthly recurring fee.
Reimbursements
The Company incurs certain out-of-pocket expenses that are reimbursed by its clients, which are accounted for as revenue in its Statement of Operations.
Net Income (Loss) per Common Share
Basic income (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the years ended December 31, 2017 or 2016.
F-8
Income Taxes
The Company accounts for income taxes pursuant to FASB ASC 740. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Companys financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimates.
Fair Value of Financial Instruments
The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of December 31, 2017 and 2016 the carrying value of accounts receivable, accounts payable-trade and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.
Customer Concentration Disclosure.
For the year ended December 31, 2017, four customers made up 100% of our gross revenue. They represent 43%, 22%, 21% and 14%. For the year ended December 31, 2016, one customer made up 55% of our gross revenue.
Stock-Based Compensation
Stock compensation arrangements with non-employee service providers are accounted for in accordance ASC 505-50
Equity-Based Payments to Non-Employees,
using a fair value approach. For the year ended December 31, 2017 and 2016 the Company recorded $0 and $1,640, respectively, in stock-based compensation.
Estimates
The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of December 31, 2017 and cumulative expenses from inception. Actual results could differ from those estimates made by management.
Recent accounting pronouncements
In March 2016, the Financial Accounting Standards Board issued Accounting Standards Codification Update No. 2016-09 Compensation Stock Compensation (Topic 718). The amendments in this update affect all entities that issue share-based payment awards to their employees. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this amendment had no effect on the financial statements.
F-9
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers which modifies how all entities recognize revenue and various other revenue accounting standards for specialized transactions and industries. This update is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of 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. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of the ASU to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of this amendment had no effect on the financial statements.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3. Note Payable
On March 16, 2017, the Company executed a promissory note (the Note) with an unaffiliated lender in the amount of $25,000. The Note matures one year from issuance and has a 12% interest rate. For the year ended December 31, 2017, the Company recorded $2,449 in interest expense. Per an amendment to Note, the due date was extended until December 31, 2018.
4. Common Stock
On February 16, 2016, the Board of Directors approved an agreement with legal counsel for the Company which included; the issuance of 82,000 shares of common stock and the total payment of $15,000 to counsel for services rendered through the date the Companys S-1 filing is declared effective. The $15,000 will be paid the sooner of any combination of; (i) the sum of $500 per month commencing on November 1, 2015, (ii) the first use of proceeds from the S-1 offering, or (iii) the change of control of the Company. As part of the sale of the majority shareholders stock the remaining balance owed under this arrangement was paid off. No amounts were due as of December 31, 2017.
5. Income Taxes
The provision for income taxes for the twelve months ended December 31, 2017 and 2016 was as follows (assuming a 21% effective tax rate):
|
|
|
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
|
|
|
Current Tax Provision:
|
|
|
|
Federal-State-Local
|
-
|
|
$
-
|
|
|
|
|
Total current tax provision
|
$
-
|
|
$
-
|
|
|
|
|
Deferred Tax Provision:
|
|
|
|
Loss carry-forwards
|
(5,218)
|
|
(5,250)
|
Change in valuation allowance
|
5,218
|
|
5,250
|
|
|
|
|
Total deferred tax provision
|
$
-
|
|
$
-
|
F-10
The Company had deferred income tax assets as follows:
|
|
|
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
Loss carry-forwards
|
$
(15,340)
|
|
$
(8,436)
|
Less - valuation allowance
|
15,340
|
|
8,436
|
|
|
|
|
Total net deferred tax assets
|
$
-
|
|
$
-
|
The Company provided a valuation allowance equal to the deferred income tax assets for period ended December 31, 2017 because it is not presently known whether future taxable income will be sufficient to utilize the loss carry-forwards.
As of December 31, 2017, the Company had approximately $85,224 in tax loss carry-forwards that can be utilized future periods to reduce taxable income, and expire by the year 2037.
The Company did not identify any material uncertain tax positions. The Company did not recognize any interest or penalties for unrecognized tax benefits.
The federal income tax returns of the Company are subject to examination by the IRS, generally for three years after they are filed. The tax returns for year-end 2015, 2016 and 2017 are still subject to examination.
6. Related Party Loans and Transactions
William Schloth
On October 1, 2015 the Company has engaged the services of William Schloth (WS Agreement) to provide assistance with filing of the Companys Registration Statement on Form S-1, general accounting, finance, general management and client delivery services. Mr. Schloth is the husband our Mary Ellen Schloth, the then CEO and majority shareholder of MLH, the Companys then majority shareholder. The WS Agreement provides for a monthly consulting fee of $5,000, plus additional payments based upon services rendered during a period. Along with MLHs Transaction the WS Agreement. No amounts are owed under the WS Agreement as of December 31, 2017.
During the period the WS Agreement was in-place the Company has reflected the above arrangement in the statements of operations as related party expenses. For the twelve months ended December 31, 2017 and 2016 the Company paid $19,150, and $74,850, respectively. For the twelve months ended December 31, 2017 and 2016, of that amount, $5,100 and $31,200, and, $14,050 and $43,650 have been allocated to operating expenses and cost of revenue, respectively.
Shareholder Loan
For the periods ended December 31, 2017 and 2016, the Company owed the sole officer and director $163 and $26,250.
7.
Subsequent Events
On June 7, 2018, the Company executed an addendum (the Addendum) to the promissory note. The Addendum extended the due date to December 31, 2018.
F-11