NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
and Nature of Business
ACRT
(“the Company’s TurnScor® and CyberloQ® products”, “We” or the “Company”) is
a development-stage technology company focused on fraud prevention and credit management. The Company was incorporated in the
State of Nevada on February 25, 2008.
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.
The
CyberloQ Vault is a “cloud based’ security protocol that allows clients the ability to send/receive secure DATA without
having to use traditional e-mail which is prone to a breach. This CyberloQ service uses cloud based encryption and a secure web
portal to send/receive confidential data, the sender and receiver both must have authenticated their position within the prescribed
geo coordinates as well as authenticate their mobile devices prior to sending/receiving any data. Thus rendering a hack or breach
utterly useless for the encrypted data is unusable without the CyberloQ authentication component.
In
addition to CyberloQ, the Company offers a web-based 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.
On
June 15, 2017, the Company created a private limited company in the United Kingdom named CyberloQ Technologies LTD. CyberloQ Technologies
LTD is a wholly-owned subsidiary of the Company, and any business that the Company has in the United Kingdom will be transacted
through CyberloQ Technologies LTD. However, to date CyberloQ Technologies LTD has not had any operating activity or generated
any revenue for the Company.
Basis
of Presentation
The
financial statements of the Company have been prepared using the accrual basis of accounting in accordance with generally accepted
accounting principles in the United States of America and the rules of the Securities and Exchange Commission. All amounts are
presented in U.S. dollars. The Company has adopted a December 31 fiscal year end.
Certain
information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with
a reading of the financial statements and notes thereto included in our Annual Report on From 10-K for the fiscal year ended December
31, 2018, as filed with the U.S. Securities and Exchange Commission.
Principles
of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled
operating subsidiaries. All intercompany accounts and transactions have been eliminated.
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. As of September 30, 2019 and
December 31, 2018, the Company had no 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 quarters ended September 30, 2019 and 2018, we expensed $6,193 and $27,092,
respectively, for expenditures on research and development. None was paid to related parties.
Fixed
Assets, Intangibles and Long-Lived 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 three to fifteen years.
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.
As of September 30, 2019 and December 31, 2018, the Company had not experienced impairment losses on its long-lived assets.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted the requirements of ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606
(ASU 2014-09 or ASC 606). The adoption of ASC 606 resulted in changes to the Company’s accounting policies for revenue
recognition previously recognized under ASC 605 (Legacy GAAP), as detailed below. However, since the Company had not earned any
revenue prior to adopting ASC 606, this policy change had no effect on any financial statements from prior periods, thus no adjustments
have been made to any prior periods related to the adoption of ASC 606.
Revenue
Recognition Policy
Under
ASC 606, the Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that
reflects the consideration the Company expects to receive in exchange for those products or services. To achieve the core principle
of ASC 606, the Company performs the following steps:
1)
Identify the contract(s) with a customer;
2)
Identify the performance obligations in the contract;
3)
Determine the transaction price;
4)
Allocate the transaction price to the performance obligations in the contract; and
5)
Recognize revenue when (or as) we satisfy a performance obligation.
The
Company derives its revenue from two sources: (1) subscription revenues, which are comprised of subscription fees from customers
utilizing the Company’s TurnScor®, CyberloQ™ and CyberloQ Vault products and from customers purchasing additional
support beyond the standard support that is included in the basic subscription fees; and (2) related professional services and
other revenue, which consists primarily of certain performance obligations related to set-up, ingestion, consulting and training
fees. The Company’s subscription arrangements provide customers the right to access the Company’s hosted software
applications. Customers do not have the right to take possession of the Company’s software during the hosting arrangement.
As
of September 30, 2019, the Company had $0 in contract assets, as well as a contract liability of $20,838 to perform on contracts.
As of December 31, 2018, the Company has $0 in contract assets, however there was a commitment receivable of $9,000 from a customer’s
non-refundable two year (beginning August 28, 2018) service contract, as well as a contract liability of $39,585 to perform on
that contract as of December 31, 2018. The contract liability will be reduced by $2,083 per month as the Company provides a non-exclusive,
non-transferable license to use the CyberloQ Vault Services for the customer’s internal purposes and earns and recognizes
related revenue.
|
|
|
Contract Asset
|
|
|
Contract Liability
|
|
|
December 31, 2018
|
|
$
|
0
|
|
|
$
|
39,585
|
|
|
Less: revenue earned and recognized
|
|
|
-
|
|
|
|
(18,747
|
)
|
|
September 30, 2019
|
|
$
|
0
|
|
|
$
|
20,838
|
|
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.
Advertising
Advertising
costs are expensed as incurred. Advertising expense for the periods ended September 30, 2019 and 2018 were $4,769 and $11,418,
respectively.
Income
Taxes
Deferred
income taxes are provided using the liability method (in accordance with ASC 740) 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. The Company is not aware of uncertain tax positions.
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, 2019 and December 31, 2018 the Company has 500,000 and 1,125,000 warrants as well as 1,200,000 and 1,200,000 options
issued (respectively) that can be exercised and could be dilutive to the existing number of shares issued and outstanding. However,
due to the Company’s periods of losses, the basic weighted average is equal to the diluted weighted average shares 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 and warrant
awards are valued using the Black-Scholes option-pricing model, which according to ASC 820-10 is a level 3 value on the hierarchy.
Black Scholes assumptions were calculated using stock price at grant date between $0.29 to $0.149; exercise prices between $0.15
to $0.20: life expectancy between ½ year to 5 years; and volatility ranging from 163% to 68%.
Recent
Accounting Pronouncements
In
July 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting. The amendments expand the
scope of ASC 718, Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and
services from nonemployees and to supersede the guidance in ASC 505-50, Equity-Based Payments to Non-Employees. The accounting
for nonemployee awards will now be substantially the same as current guidance for employee awards. ASU 2018-07 impacts all entities
that issue awards to nonemployees in exchange for goods or services to be used or consumed in the grantor’s own operations,
as well as to nonemployees of an equity method investee that provide goods or services to the investee that are used or consumed
in the investee’s operations. ASU 2018-07 aligns the measurement-date guidance for employee and nonemployee awards using
the current employee model, meaning that the measurement date for nonemployee equity-classified awards generally will be the grant
date, while liability-classified awards generally will be the settlement date. ASU 2018-07 is effective for public business entities
for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company has determined
that there is no retroactive effect on its financial reports from the adoption of this standard. The Company adopted ASU 2018-07
on January 1, 2019.
NOTE
2 – FIXED ASSETS
Software
and computer equipment, recorded at cost, consisted of the following:
|
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
Software and computer equipment
|
|
$
|
736,500
|
|
|
$
|
720,750
|
|
|
Less: accumulated depreciation
|
|
|
(261,421
|
)
|
|
|
(170,071
|
)
|
|
Property and equipment, net
|
|
$
|
475,079
|
|
|
$
|
550,679
|
|
Depreciation
expense was $30,669 and $91,350; $30,012 and $90,037 for the three and nine month periods ended September 30, 2019 and 2018, respectively.
NOTE
3 – GOING CONCERN
The
Company has incurred losses since Inception resulting in an accumulated deficit of $4,026,826 as of September 30, 2019 that includes
a loss of $115,205 for the quarter ended September 30, 2019. Further losses are anticipated in the development of its business.
Accordingly, there is substantial doubt about the entity’s ability to continue as a going concern within one year after
the financial statements are issued.
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.
NOTE
4 – DEPOSITS
The
Company holds $10,000 down payment from a customer to secure future services.
NOTE
5 – STOCKHOLDERS’ EQUITY
Common
Stock
The
Company has 100,000,000 shares of $.001 par value common stock authorized as of September 30, 2019 and December 31, 2018.
The
Company has an agreement to issue 3,333,333 common shares for $300,000 by June 30, 2019. Currently, the Company has collected
$265,000 towards that agreement, and is disclosing the full amount and the related 3,333,333 common shares as “To be Issued”.
Once the remaining stock subscription of $35.000 is collected, the Company will issue the entire 3,333,333 common shares.
During
2018, the Company received $322,000 in payment for 3,203,334 shares of common stock; received $83,300 in services for 435,000
shares of common stock. Also during 2018: the Company issued 60,000 shares of common stock in payment of $6,000 of accrued legal
fees, recognizing a loss on settlement of debt of $12,000; and the Company converted $12,000 of debt into 150,000 shares, these
shares were previously recorded as “Shares to be Issued” in the Balance Sheet. There were 65,830,515 shares of common
stock issued and outstanding as of December 31, 2018.
During
2019, the Company received $200,000 in payment for 2,000,000 shares of common stock and issued 300,000 shares to officers in conjunction
with their 2018 service agreement, which were previously recorded as “Shares to be Issued” in the balance sheet. There
were 68,130,515 shares of common stock issued and outstanding as of September 30, 2019.
Preferred
Stock
The
Company did not have any preferred stock prior to 2017. In April of 2017, the Company amended its articles of incorporation to
create a new class of stock designated Series A Super Voting Preferred Stock consisting of thirty-thousand (30,000) shares at
par value of $0.001 per share. Certain rights, preferences, privileges and restrictions were established for the Series A Preferred
Stock as follows: (a) the amount to be represented in stated capital at all times for each share of Series A Preferred Stock shall
be its par value of $0.001 per share; (b) except as otherwise required by law, holders of shares of Series A Preferred Stock shall
vote together with the common stock as a single class and the holders of Series A Preferred Stock shall be entitled to five-thousand
(5,000) votes per share of Series A Preferred Stock; and (c) in the event of any liquidation, dissolution or winding-up of the
Company, either voluntary or involuntary, the holders of the Series A Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of assets of the Corporation to the holders of the common stock, the original purchase price
paid for the Series A Preferred Stock. All 30,000 shares of the Series A Super Voting Preferred Stock were issued in 2017.
NOTE
6 – COMMITMENTS
The
Company rents office space on a month to month basis for its main office at 871 Venetia Bay Blvd Suite #202 Venice, FL 34285.
Monthly rent for this space is $50. All conditions have been met and paid by the Company.
In
2015, in conjunction with a proposed TurnScor Card platform, the Company signed Investor Royalty and Warrant Agreements with four
parties. In exchange for the funds contributed by the four parties, the Company agreed to:
|
1.
|
Pay
the investors monthly residuals of 2.0% to 5% per month on the gross revenue after expenses generated by the Company’s
primary platform in conjunction with the Company’s TurnScor Card;
|
|
|
|
|
2.
|
Pay
the investors a residual in perpetuity on 2% to 5% of all TurnScor Card sub-platform revenue generated; and
|
|
|
|
|
3.
|
Issue
warrants to investors all of which have either been exercised or expired.
|
The
Company does not plan to proceed with the TurnScor Card at this time.
During
fiscal year 2018, the Company wrote off $17,646 in advanced commissions paid to a sales person who dissolved their contractor
agreement with the Company.
The
Company has commission agreements as follows:
An
agreement with a shareholder and director of the Company stating that the executive will be entitled to a two-and-a half-percent
(2.5%) commission of the gross revenue recorded by the Company for any customer contracts that are closed by the Company at the
time of and during the duration of the agreement. These commissions are payable quarterly upon receipt of customer revenues.
An
agreement with an independent company granting that company a non-exclusive, non-transferable license to provide the CyberloQ
Vault Services to its customers and the revenues derived will be divided 50/50 between that independent company and Advanced Credit
Technologies Inc.
An
agreement with two sales managers granting each manager a 1% commission on the gross revenue of the Company. These commissions
are payable quarterly upon receipt of customer revenues.
A
one year renewable agreement with an independent company granting that company a non-exclusive, non-transferable license to provide
the CyberloQ Vault Services to a certain territory and for a defined term.
The
independent company will pay Advanced Credit Technologies, Inc. a monthly fee of $100. Advanced Credit Technologies will pay a
commission of 90% less transaction fees.
NOTE
7 – RELATED PARTY TRANSACTIONS
Acquisition
of Cyberloq™
During
2017, the Company acquired the CyberloQ™ banking fraud prevention technology. (the “Technology”) Pursuant to
the asset purchase agreement, the prior license agreement between the Company and CartenTech LLC was terminated, and the Company
is now the exclusive owner of the CyberloQ™ banking fraud prevention technology along with all intellectual property rights
associated with the Technology which is copyrighted with the United States Copyright Office. The owner of CartenTech LLC is Mark
Carten, who is also a director of ACRT and its Chief Technology Officer. On July 28, 2017, the Company purchased the Technology
with a value of $720,000. As consideration for the acquisition of and all rights to the Technology, CartenTech LLC received: (a)
payment of $50,000, (b) a note for $150,000, and (c) 4,000,000 shares of the Company’s common stock. The software is being
depreciated over its useful life of six-years in conjunction with the Company’s depreciation policy.
Issuance
of Warrants/Options
All
warrants and options are fully vested and exercisable.
The
following is a summary of the warrants issued in connection with common stock:
|
Date
|
|
11/30/15
|
|
|
11/30/15
|
|
|
6/28/16
|
|
|
Wtd. Avg. Life
|
|
Wtd. Avg.Price
|
|
|
Warrants
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
625,000
|
|
|
|
|
|
-
|
|
|
Exercise price
|
|
$
|
0.15
|
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
|
|
|
-
|
|
|
Expected life
|
|
|
4 year
|
|
|
|
5 year
|
|
|
|
3 year
|
|
|
|
|
|
-
|
|
|
Unexpired 12/31/18
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
625,000
|
|
|
3.11 years
|
|
$
|
0.1889
|
|
|
Unexpired 9/30/19
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
-
|
|
|
4.5 years
|
|
$
|
0.1750
|
|
The
following is a summary of the options issued in connection with common stock:
|
Date
|
|
FY 2017
|
|
|
FY2018
|
|
|
Wtd. Avg. Life
|
|
|
Wtd. Avg. Price
|
|
|
Options
|
|
|
100,000
|
|
|
|
1,100,000
|
|
|
|
-
|
|
|
|
|
|
|
Exercise price
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
|
-
|
|
|
|
|
|
|
Expected life
|
|
|
5 year
|
|
|
|
5 year
|
|
|
|
-
|
|
|
|
|
|
|
Unexpired 12/31/18
|
|
|
100,000
|
|
|
|
1,100,000
|
|
|
|
5
years
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unexpired 9/30/19
|
|
|
100,000
|
|
|
|
1,100,000
|
|
|
|
2.25 years
|
|
|
$
|
0.15
|
|
In
2016 and 2017, Rex Schuette, one of the Company’s directors, was issued two warrants to potentially acquire a total of 1,250,000
additional shares of common stock. One warrant to potentially acquire an additional 625,000 shares of common stock expired on
June 19, 2018, and the other warrant to potentially acquire an additional 625,000 shares of common stock expired on June 28, 2019.
Both warrants are exercisable at $0.20 per share. The Company revalued the warrants based on information that has come forward
that caused a recalculation of the 1,250,000 warrants value from the $51,592 (as disclosed in the December 31, 2017 footnote)
to the corrected amount $96,643. This re-valuation had no material impact on 2017, given that the majority of expense was recorded
in 2018 and 2019. The Company has issued non-qualified options to an independent contractor, during 2018 there have been 1,200,000
options issued to this contractor. All options are exercisable at $0.15 per share and have a 5 year life. All non-expired warrants
are being expensed ratably through expiration; all non-expired options are expensed as stock compensation is vested. As of September
30, 2019, the remaining non-expired warrant amount to be expensed is $0; the amount expensed during the first, second, and third
Quarter of 2019 for these warrants is $27,855 and for options is $0. The total number of warrants and options outstanding as of
September 30, 2019 is 500,000 and 1,200,000 respectively.
Related
Party Loans Payable
The
following is a summary of related party loans payable:
|
|
|
For the Periods Ended
|
|
|
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
Loans payable – stockholders
|
|
$
|
35,000
|
|
|
$
|
45,000
|
|
|
Loans from related parties
|
|
$
|
0
|
|
|
$
|
0
|
|
Loans
Payable - Stockholders
On
December 29, 2014, the Company entered into a partially-convertible promissory note with a shareholder in the amount of $35,000.
In January of 2015, the shareholder partially-exercised its conversion option, and in May of 2016 the shareholder exercised the
remainder of its conversion option. In December 2017, the remaining unpaid principal and interest due on the note was settled
in full for a $50,000 note and the Company recognized $151,324 in gain on settlement of debt. The $50,000 note has a current principle
balance of $35,000, a stated interest rate of 0%, required payments of $5,000 on or before June 10, 2019, $5,000 on or before
August 10, 2019 and the remainder due by the extended due date of September 15, 2019. As of September 30, 2019 the payments due
have not been extended, the Company is in default of its obligation.
Loans
from Related Parties
There
are no loans from related parties at this time.
NOTE
8 – SUBSEQUENT EVENTS
The
Company is not aware of any subsequent events through the date of this filing that require disclosure or recognition in these
financial statements. In addition, there exists no information required to be disclosed by the Company in a report on Form 8-K
during the three-month period ended September 30, 2019, but not already reported.