OPLF Optileaf Inc (CE)

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TABLE OF CONTENTS

AUDIT REPORT

See accompanying notes to financial statements.

See accompanying notes to financial statements.

See accompanying notes to financial statements

See accompanying notes to financial statements

OptiLeaf, Inc.
Notes to Financial Statements
For the Years Ended December 31, 2018 and 2017

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

OptiLeaf Incorporated (“OptiLeaf” or the “Company”) was incorporated in Florida in August 2014. The Company has been in the development stage since inception and has generated minimal sales to date. The Company plans to develop, market and sell integrated software and hardware to the agriculture industry for the seamless tracking and management of growth, task automation and sale of their clients’ products.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2018, the Company had no cash equivalents.

Accounts Receivable

The Company has $2,300 and $6,150 of trade accounts receivable at December 31, 2018 and 2017. The Company reviews the accounts receivable, at least quarterly, and, if appropriate, records an allowance for doubtful accounts. No allowance was required as of December 31, 2018 and 2017.

Inventory

The Company maintains a minimal inventory, at cost, to provide its clients with the necessary hardware required to avail themselves of the internet service.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Property and Equipment

Property and equipment are stated at cost. Depreciation is expensed over the estimated useful lives (3 years) of the related assets using the straight-line depreciation method.

Maintenance and repairs are charged to operations when incurred. Betterments and improvements are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are reduced, and any gain or loss is included in other income (expense) in the Statement of Operations for the Years Ended December 31, 2018 and 2017.

Capitalized Software Development Costs

Software development costs are expensed as incurred until technological feasibility of the product is established. Development costs incurred subsequent to technological feasibility will be capitalized and amortized on a straight-line basis over the estimated economic life of the product. Capitalization of computer software costs will be discontinued when the computer software product is available to be sold, leased, or otherwise marketed. Amortization will begin when the product is available for release to customers. Management has determined as of December 31, 2018 that the software has not yet reached the stage of technological feasibility. The Company has not maintained specific cost records, but estimates that $107,000 and $112,500 has been expensed for software development and is included in payroll expense for the years ended December 31, 2018 and 2017 respectively.

Revenue Recognition

Effective January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in US GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. The Company adopted ASC 606 using the modified retrospective method, which did not have an impact on its financial statements. The Company recognizes revenue from product sales or services rendered when the following five revenue recognition criteria are met: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation.

OptiLeaf, Inc.
Notes to Financial Statements
For the Years Ended December 31, 2018 and 2017

The Company receives payments from individual clients. As the period between the time of service and time of payment is typically less than 30 days, the Company elected the practical expedient under ASC 606-10-32-18 and does not adjust for the effects of a significant financing component. Revenue is recognized at the point of time at the conclusion of when services are performed for individual clients and all performance obligations have been met.

The Company recognizes revenue from product sales or services rendered when the five revenue recognition criteria are met: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation.

Research and Development

The cost of research and development is charged to expense when incurred.

Net Loss per Common Share

Basic net (loss) income per common share is calculated using the weighted average common shares outstanding during each reporting period. Diluted net (loss) income per common share adjusts the weighted average common shares for the potential dilution that could occur if common stock equivalents (convertible debt and preferred stock, warrants, and stock options) were exercised or converted into common stock. There were no common stock equivalents at December 31, 2018 and 2017.

Income Taxes

Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets will not be realized. Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities.

ASC 740, Income Taxes, requires a company to first determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

The Federal and state income tax returns of the Company for 2018, 2017 and 2016 are subject to examination by the internal Revenue Service and state taxing authorities for three (3) years from the date filed. The Company has filed returns through to 2018.

Stock-Based Compensation

The Company follows ASC 718 - 10, Stock Compensation, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718 - 10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant - date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options; nor has it made any awards of stock, or stock equivalents.

Fair Value of Financial Instruments and Fair Value Measurements

ASC 820, “Fair Value Measurements”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

OptiLeaf, Inc.
Notes to Financial Statements
For the Years Ended December 31, 2018 and 2017

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model - derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash equivalents, accounts payable, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that OptiLeaf, Inc. Notes to Financial statements As of December 31, 2018 the recorded values of all of our financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842) (“ASU 2016-02”), which requires all leases with a term greater than 12 months to be recognized on the balance sheet, while lease expenses would continue to be recognized in the statement of operations in a manner similar to current accounting guidance. We will make an accounting policy election that will keep leases with an initial term of 12 months or less off of the balance sheet and will result in recognizing those lease payments in our consolidated statements of operations on a straight-line basis over the lease term. The new standard establishes a right-of-use model (ROU) asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. ASU 2016-02 will be effective for the Company on January 1, 2019. We anticipate adopting ASU 2016-02 on a modified retrospective basis effective January 1, 2019, without adjusting comparative periods presented. The Company does not have any leases which meet the criteria.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

Note 2. GOING CONCERN

The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company has experienced losses, from operations, during its development stage, as a result of the investment necessary to achieve its operating plan, which is long-range in nature. For the period from inception through December 31, 2018, the Company incurred accumulated losses of $856,438, compared to a cumulative loss through December 31, 2017, of $699,759. For the year ended December 31, 2018 the Company sustained a loss of $156,679 and had negative working capital of $15,438 compared to a loss of $206,433 and working capital of $2,842 for the year ended December 31, 2017. In addition, the Company has minimal revenue generating from operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance of this report. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

During the year ended December 31, 2018 the Company used $140,907 for operating expenses compared to $212,581 during the year ended December 31, 2017. The Company generated $50,000 from the sale of common stock, $40,000 from the issuance of notes payable and $45,000 from related parties, during the year ended December 31, 2018 compared to $35,000 from the sale of stock during the year ended December 31, 2017.

OptiLeaf, Inc.
Notes to Financial Statements
For the Years Ended December 31, 2018 and 2017

The ability of the Company to continue as a going concern is in doubt and is dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations.

To meet these objectives, the Company continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business. However, there are no assurances that any such financing can be obtained on acceptable terms and timely manner, if at all. The failure to obtain the necessary working capital would have a material adverse effect on the business prospects and, depending upon the shortfall, the Company may have to curtail or cease its operations.

The accompanying financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

Depreciation expense was $0 and $2,660 for the years ended December 31, 2018 and 2017, respectively.

Note 4. RELATED PARTY TRANSACTIONS

During the year ended December 31, 2018, two related party shareholders made unsecured loans, to the Company, totaling $45,000, maturing on April 1, 2020, bearing interest of 3%. See subsequent events, note 9.

During the year ended December 31, 2018, a related party purchased, from the company, $7,000 worth of services, which were paid for on December 14, 2018.

Note 5. STOCKHOLDERS’ EQUITY

Common stock

The Company has authorized 100,000,000 shares of no par value common stock. At December 31, 2018 and 2017, the number of shares of common stock issued was 20,777,086 and 20,443,752 respectively.

On September 14, 2017, the Company issued, for cash, to an investor, 233,333 restricted common shares for $35,000, recorded at a cost of $0.15 per share.

On July 25, 2018, the Company issued, for cash, to two investors, 333,334 restricted common shares for a total of $50,000, recorded at a cost of $0.15 per share.

Treasury stock

On September 20, 2016, the Board of Directors authorized the Company to repurchase one million shares of common stock for $40,000. These treasury stock shares may, at any time, be canceled upon the Board of Directors approval. The Board has not made such election. See subsequent event note 9.

Note 6. CONCENTRATION CREDIT RISK

At December 31, 2018 the Company had two non – related customers that owed 58.5% and 41.5% of total accounts receivable, compared to December 31, 2017 when four non – related customers owed 47.8%, 39.1%, 13% and 17.2%.

The Company maintains its cash balances in a local financial institution which at times may exceed the $250,000 amount insured by the Federal Deposit Insurance Corporation (FDIC). On December 31, 2018 and 2017the Company did not have cash balances which would exceed the limit.

OptiLeaf, Inc.
Notes to Financial Statements
For the Years Ended December 31, 2018 and 2017

Note 7. COMMITMENTS AND CONTINGENCIES

On August 10, 2018 the Company leased its offices for six years, payable at the rate of $2,000 per month, plus the Company’s pro rata share of operating expenses. No payment was made. The lease was subsequently cancelled and rescinded.

Note 8. INCOME TAXES

The Company accounts for income taxes under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 740, Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Tax Cuts and Jobs Act of 2017 changed the top corporate tax rate from 35% to one rate of 21%. This rate will be effective for corporations whose tax year begins after January 1, 2018, and it is a permanent change. Under ASC 740, the effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The resulting amendments to IRC Section 172 disallow the carryback of net operating losses but allow for the indefinite carryforward of those net operating losses. Pursuant to Section 172(e)(2) of the statute, the amended carryback and carryover rules apply to any net operating loss arising in a taxable year ending after December 31, 2017. In addition to the carryover and carryback changes, the Act also introduces a limitation on the amount of net operating losses that a corporation may deduct in a single tax year under section 172(a) equal to the lesser of the available net operating loss carryover or 80 percent of a taxpayer’s pre-NOL deduction taxable income (the “80-percent limitation”). This limitation applies only to losses arising in tax years that begin after December 31, 2017 based upon section 172(e) (1) of the amended statute.

The new tax bill reduced the federal income tax rate for corporations from 35% to 21%.

At December 31, 2018, the Company has a net operating loss carryforward of approximately $856,438 for Federal and state purposes. This loss will be available to offset future taxable income. If not used, this carryforward will begin to expire in 2035. The deferred tax asset relating to the operating loss carryforward has been fully reserved at December 31, 2018 and 2017. The change in the valuation allowance was approximately $32,429 and $95,000 for the years ended December 31, 2018 and 2017, respectively. The principal difference between the operating loss for income tax purposes and reporting purposes is disallowed meals and entertainment and a temporary difference in depreciation expense.

Utilization of the Company’s net operating losses may be subject to substantial annual limitation if the Company experiences a 50% change in ownership, as provided by the Internal Revenue Code and similar state provisions. Such an ownership change would substantially increase the possibility of net operating losses expiring before complete utilization.