NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED December 31, 2018 AND 2017
Note 1 – NATURE OF OPERATIONS
Optec International, Inc. (Formerly Green Meadow Products, Inc. "the Company", “GMP”, "Optec", "we", "us" or "our") was incorporated under the laws of the State of Wyoming on June 22, 2012.
Subsequent to acquiring the licensing rights for the Optimized Fuel Maximizer, the Company’s focus is on the expansion of the sales & marketing of the Optimized Fuel Maximizer, concentrating primarily in the North America region, followed by expansion into other geographic areas subsequent to locating and contracting with large distributors that already operate in the automotive aftermarket arena. In addition, the Company is focused on aiding the manufacturer in obtaining additional certifications from the California Air Resources Board (CARB) which, upon receiving should aid in the sales of the Optimized Fuel Maximizer units not only in California but nationally and internationally as well.
On June 4, 2018 the Company entered into an Exclusive Licensing Agreement with Optimized Fuel Technologies for the right to exclusively distribute and sell the Optimized Fuel Maximizer internationally, with the exception of the United States and Canada. Consideration of $501,500 was paid for the licensing right in the form of one million five hundred thousand (1,500,000) shares of the Company’s common shares valued at $.001 per share which were authorized to be issued to Optimized Fuel Technologies; in addition to a five hundred thousand dollars ($500,000) note payable to be paid over the course of 24 months. As of September 30, 2018, the $500,000 note payable was paid off in full.
On June 20, 2018 the Company entered into an Exclusive Licensing Agreement Addendum with Optimized Fuel Technologies for the right to exclusively sell the Optimized Fuel Maximizer worldwide. On June 4, 2018, the Company had entered into an Exclusive Licensing Agreement with Optimized Fuel Technologies for the right to exclusively sell the Optimized Fuel Maximizer internationally, with the exception of the United States and Canada; this agreement extends exclusive marketing right to include North America and Canada. Consideration of $1,000 was paid for the licensing rights under the addendum in the form of one million (1,000,000) shares of the Company’s common shares valued at $.001 per share which were authorized to be issued to Optimized Fuel Technologies. (
For further information on Optec Products acquired-www.optecmpg.com
)
On August 8, 2018 Optimized Fuel Technologies, a related party, entered into a contract with a company that desired to purchase the Optimized Fuel Maximizer on a manufacturer direct basis. As the Company owns the exclusive licensing rights to sales of the Optimized Fuel Maximizer; per the Royalty agreement dated August 27, 2018 the Company agreed to the acceptance of royalty revenue generated by sales which are made on a manufacturer direct basis.
On December 31, 2018 the exclusive North American distribution licensing rights for the
"Pro-Sun" LED Horticultural Grow Lamps were acquired from Optimized Fuel technologies for $500,000. An outstanding l
oan of $321,518 to Optimized Fuel Technologies was applied against the exclusive North American distribution licensing rights license for LED Lights in the amount of $500,000 leaving a remaining balance of $178,482 as an account payable to Optimized Fuel Technologies.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
BASIS OF PRESENTATION
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company's year-end is June 30.
ESTIMATES
The preparation of the financial statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of December 31, 2018 or 2017.
CUSTOMER AND PURCHASE CONCENTRATION
During the Six months ended December 31, 2018 and 2017, the following customers represented more than 10% of the Company’s sales.
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
$
|
|
|
|
%
|
|
|
$
|
|
|
|
%
|
|
Total licensing revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
4,500
|
|
|
|
4.9
|
|
Total royalties
|
|
|
11,722
|
|
|
|
77
|
|
|
|
-
|
|
|
|
-
|
|
Total product revenue *
|
|
|
3,526
|
|
|
|
23
|
|
|
|
85,100
|
|
|
|
95.1
|
|
Total revenue
|
|
|
15,248
|
|
|
|
100
|
|
|
|
89,600
|
|
|
|
100
|
|
Total licensing revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
3,376
|
|
|
|
22
|
|
|
|
4,500
|
|
|
|
4.9
|
|
Customer B
|
|
|
150
|
|
|
|
1
|
|
|
|
|
|
|
|
-
|
|
Customer D
|
|
|
-
|
|
|
|
-
|
|
|
|
31,600
|
|
|
|
35.3
|
|
Customer E
|
|
|
-
|
|
|
|
-
|
|
|
|
53,500
|
|
|
|
59.8
|
|
Customer F
|
|
|
11,722
|
|
|
|
77
|
|
|
|
-
|
|
|
|
-
|
|
Concentration
|
|
$
|
15,248
|
|
|
|
100
|
|
|
$
|
89,600
|
|
|
|
100
|
|
During the six months ended December 31, 2018 and 2017, the following vendors
represented more than 10% of the Company’s Purchases:
|
December 31, 2018
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
High Nexus Network
|
|
|
3,376
|
|
|
|
22
|
|
|
|
-
|
|
|
|
-
|
|
Optimized Fuel Technologies*
|
|
|
-
|
|
|
|
-
|
|
|
|
58,326
|
|
|
|
100
|
|
Total Purchases
|
|
|
-
|
|
|
|
-
|
|
|
|
58,326
|
|
|
|
100
|
|
*100% represents product purchased from Optimized Fuel Technologies.
INVENTORY
Inventory is recorded at lower of cost or market; cost is computed on a first-in first-out basis. At December 31, 2018 and June 30, 2018, we had inventory of $80,600 and $85,000 respectively, consisting of Optimized Fuel Maximizer units
.
FINANCIAL INSTRUMENTS
Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. Accounting Standards Codification ("ASC") 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs which reflect a reporting entity's own assumptions about the assumptions that market participants would use for pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.
The recorded amounts of financial instruments, comprising cash, accounts payable and income tax payable, approximate their market values as of December 31, 2018 due to the short term maturities of these financial instruments.
OTHER INTANGIBLE ASSETS
Under ASC 350-50-1, costs incurred in the acquisition of an intangible asset are capitalized by the Company. Our intangible assets are related to the acquisition of the Licensing rights for the Optimized Fuel Maximizer which is being amortized to expense over the licensing rights estimated useful life or period of benefit which is estimated to be 10 years using straight-line method; annual amortization will be approximately $50,250 per year. In addition, the purchase of our Green Meadow PR formula for natural pain relief for animals is being amortized to expense over the formula's estimated useful life or period of benefit which is estimated to be 10 years using straight-line method. On December 31, 2018 there was a loan receivable from Optimized Fuel Technologies for $321,518 which was applied towards the acquisition of the licensing rights for LED Lights for $500,000 leaving an accounts payable balance due to Optimized Fuel Technologies of $178,482. As of December 31, 2018, and June 30, 2018, the balances of our intangible assets net of accumulated amortization were $981,907 and $507,570 respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of long-lived assets and intangible assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. During the three and six months ended December 31, 2018 there is no impairment of long-lived assets or intangible assets.
INCOME TAXES
We account for income taxes in accordance with FASB ASC 740, Income Taxes which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
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. In accordance with ASC 740-10, 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 should be 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.
REVENUE RECOGNITION
Effective July 1, 2018, the Company adopted the Financial Accounting Standards Board (“FASB”) standard update ASU 2014-09, “Revenue from Contracts with Customers,” (“Topic 606”) which provides a principles-based, five-step approach to measure and recognize revenue from contracts with customers.
Revenue is recognized when the following criteria are met:
|
●
|
Identification of the contract, or contracts, with a customer
;
|
|
●
|
Identification of the performance obligations in the contract
;
|
|
●
|
Determination of the transaction price
;
|
|
●
|
Allocation of the transaction price to the performance obligations in the contract
; and
|
|
●
|
Recognition of revenue when, or as, we satisfy performance obligation
.
|
The adoption of this guidance did not have a material impact on the Company’s consolidated statement of operations, cash flows, and balance sheet as of the adoption date or for the three and six months ended December 31, 2018.
The Company's revenues have been generated primarily through the sales of the Optimized Fuel Maximizer units and sublicense and distribution agreements related to our PawPal product and our pain relief products. The terms of these agreements generally consist solely of upfront, nonrefundable payments for licensing and distribution rights. Revenues from non-refundable licensing and distribution fees are recognized upon receipt of the payment if the license has stand-alone value and we do not have ongoing involvement or obligations.
For the three and six months ended December 31, 2018 and 2017, all sales and license payments met the above criteria or in the case of one contract, the only continuing involvement was to sell our products to the distributor at pricing that is consistent with market transactions, thereby allowing for the recognition of revenue for the licensing and distribution arrangements upon receipt.
When non-refundable license fees do not meet this criteria, the license revenues are recognized over the expected period of performance. We periodically review for any expected period of substantial involvement under the agreements that provide for non-refundable up-front payments and license fees. If ever applicable, we will adjust the amortization periods when appropriate to reflect changes in assumptions relating to the duration of our expected involvement.
TRADE RECEIVABLES
Trade Receivables are the amount of billed or unbilled claims or other similar items subject to uncertainty concerning their determination or ultimate realization under contracts that are expected to be collected in the next rolling twelve months following the latest balance sheet presented. Our policies on receivables varies per customer, but in no case do we allow for a receivable to be outstanding for more than 12 months. As of December 31, 2018, we had no open trade receivables, we had royalty receivables of $11,722. In the year ended June 30, 2018, we expensed $85,100 to bad debt as uncollectable receivables.
ADVERTISING COSTS
The Company's policy regarding advertising is to expense advertising when incurred. The Company incurred advertising and marketing expense of $0 for the three months and $3,774 during the six months ended December 31, 2018 and $5,400 during the three and six months ended December 31, 2017.
NET INCOME (LOSS) PER SHARE OF COMMON STOCK
The Company computes net income (loss) per share in accordance with ASC 105, "Earnings per Share" which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. For the six months ended December 31, 2018,
5,584,947
shares, (3,364,951 from convertible notes and
2,219,996
from warrants), were potentially dilutive common shares and for the six months ended December 31, 2017 there were no diluted shares.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations.
Note 3 – GOING CONCERN
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
As of December 31, 2018, the Company had yet to establish a proven, reliable, recurring source of revenue to fund its ongoing operating costs and has insufficient funds to fully implement its proposed business plan.
This raises substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is contemplating conducting an offering of its debt or equity securities to obtain additional operating capital. The Company is dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
Note 4 – LOANS RECEIVABLE
On November 1, 2017 the board of Directors approved a revolving loan receivable with a three- year maximum term and a limit of $250,000 to Optimized Fuel Technologies, a related party and the manufacturer of the Fuel Maximizer units we sell. The loan is intended to have various advances at a 0% interest rate for the first 90 days with the interest rate subject to adjustment thereafter. Through June 30, 2018 $109,000 in loans were made to facilitate the additional CARB (California Air Resources board) certifications, Patents expanded, and other certifications needed, which are required for both domestic and international markets. The $109,000 was paid in full by being credited against a $500,000 note payable for licensing rights. On August 31, 2018 another loan was made to Optimized Fuel Technologies in the amount of $391,000 which was also credited against the $500,000 note payable resulting in the $500,000 note being paid in full. At December 31, 2018 there was a loan receivable from Optimized Fuel Technologies for $321,518 which was applied towards the acquisition of the licensing rights for LED Lights for $500,000 leaving an accounts payable balance due to Optimized Fuel Technologies of $178,482. The acquisition for the licensing rights for the LED lights occurred on December 31, 2018.
Note 5 - CONVERTIBLE LOANS
At December 31, 2018 and June 30, 2018, convertible loans consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2018
|
|
November 7, 2017 Note
|
|
$
|
-
|
|
|
$
|
29,167
|
|
April 30, 2018 Note
|
|
|
-
|
|
|
|
112,500
|
|
June 15, 2018 Note
|
|
|
193,102
|
|
|
|
200,000
|
|
July 9, 2018 Note
|
|
|
110,000
|
|
|
|
-
|
|
July 16, 2018 Note
|
|
|
115,000
|
|
|
|
-
|
|
August 2, 2018 Note
|
|
|
212,250
|
|
|
|
-
|
|
August 15, 2018 Note
|
|
|
73,000
|
|
|
|
-
|
|
September 7, 2018 Note
|
|
|
84,000
|
|
|
|
-
|
|
September 7, 2018 Note
|
|
|
36,750
|
|
|
|
-
|
|
September 10, 2018 Note
|
|
|
55,000
|
|
|
|
-
|
|
September 19, 2018 Note
|
|
|
100,000
|
|
|
|
-
|
|
October 3, 2018 Note
|
|
|
83,500
|
|
|
|
-
|
|
October 30, 2018 Note
|
|
|
95,000
|
|
|
|
-
|
|
November 1, 2018 Note
|
|
|
258,570
|
|
|
|
-
|
|
November 13, 2018 Note
|
|
|
56,250
|
|
|
|
-
|
|
December 6, 2018 Note
|
|
|
56,250
|
|
|
|
-
|
|
December 18, 2018 Note
|
|
|
20,000
|
|
|
|
-
|
|
Total convertible notes payable
|
|
|
1,548,672
|
|
|
|
341,667
|
|
Less: Unamortized debt discount
|
|
|
(677,563
|
)
|
|
|
(293,087
|
)
|
Total convertible notes
|
|
|
871,109
|
|
|
|
48,580
|
|
|
|
|
|
|
|
|
|
|
Less: current portion of convertible notes
|
|
$
|
871,109
|
|
|
$
|
48,580
|
|
Long-term convertible notes
|
|
$
|
-
|
|
|
$
|
-
|
|
During the three and six months ended December 31, 2018 and 2017, the Company recognized amortization of debt discount, included in interest expense, of $328,904 and $615,344; and $0 and $42,257 respectively.
Promissory Notes and Warrants – Issued for the six months ended December 31, 2018
During the six months ended December 31, 2018, the Company issued a total of $1,482,570 promissory notes (“Notes”) with the following terms:
|
·
|
Terms ranging from 9 months to 37 months.
|
|
·
|
Annual interest rates of 0% to 12%.
|
|
·
|
Certain notes are convertible at the option of the holders at issuance, 90 days, or 180 days from issuance.
|
|
·
|
Conversion prices are typically based on the discounted (38% to 50% discount) average closing prices or lowest trading prices of the Company’s shares during various periods prior to conversion.
|
Certain notes allow the Company to redeem the notes at rates ranging from 130% to 150% depending on the redemption date provided that no redemption is allowed after the 180
th
day. Likewise, the note includes original issue discounts and financing costs totaling to $305,428 and the Company received cash of $1,177,143. During the six months ended December 31, 2018, the Company repaid principal amount on convertible notes of $268,667.
The Company identified conversion features embedded within certain notes and warrants issued during the six months ended December 31, 2018 and the year ended June 30, 2018. The Company has determined that the conversion feature of the Notes represents an embedded derivative since the conversion price is variable and the Notes include a reset provision which could cause adjustments upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. During the six months ended December 31, 2018, the 73,863 warrants issued with convertible notes, are exercisable into 73,863 shares of common stock, for a period of five years from issuance, at a price of $7.00 to $8.40 per share. As a result of the reset features for these warrants, at December 31, 2018, the warrants increased by 2,193,015 and the total warrants are now exercisable into 2,219,996 shares of common stock at $0.26 per share. The reset feature of warrants associated with this convertible note was effective at the time that a separate convertible note with lower exercise price was issued. We accounted for the issuance of the Warrants as a derivative (see Note 6).
Warrants
A summary of activity during the six months ended December 31, 2018 regarding warrants issued as follows:
|
|
Warrants Outstanding
|
|
|
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
Exercise Price
|
|
|
|
|
|
|
|
Outstanding, June 30, 2018
|
|
|
49,300
|
|
|
$
|
2.92
|
|
Granted
|
|
|
73,863
|
|
|
|
7.81
|
|
Reset feature
|
|
|
2,193,015
|
|
|
|
0.29
|
|
Exercised
|
|
|
(96,182
|
)
|
|
|
1.49
|
|
Forfeited/canceled
|
|
|
-
|
|
|
|
-
|
|
Outstanding, December 31, 2018
|
|
|
2,219,996
|
|
|
$
|
0.26
|
|
The following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2018.
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Number of
|
|
|
Weighted Average Remaining
Contractual life
|
|
Weighted Average
|
|
|
Number of
|
|
Weighted Average
|
|
Shares
|
|
|
(in years)
|
|
Exercise Price
|
|
|
Shares
|
|
Exercise Price
|
|
|
2,219,996
|
|
|
|
4.66
|
|
|
$
|
0.26
|
|
|
|
2,219,996
|
|
|
$
|
0.26
|
|
Conversion
During the six months ended December 31, 2018, the Company converted notes with principal amounts and accrued interest of $19,956 into 77,500 shares of common stock and 96,182 cashless warrant were exercised into 99,973 shares of common stock. The corresponding derivative liability at the date of conversion of $773,403 was credited to additional paid in capital.
Note 6 - DERIVATIVE LIABILITIES
The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.
Fair Value Assumptions Used in Accounting for Derivative Liabilities.
ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of December 31, 2018. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.
At December 31, 2018 and June 30, 2018, the estimated fair values of the liabilities measured on a recurring basis are as follows:
|
|
Six Months Ended
|
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
|
June 30, 2018
|
|
Expected term
|
|
0.08 - 5.00 years
|
|
|
0.02 - 5.00 years
|
|
Expected average volatility
|
|
|
67% - 419
|
%
|
|
|
12% - 487
|
%
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
Risk-free interest rate
|
|
|
2.19% - 3.03
|
%
|
|
|
1.37% - 2.81
|
%
|
The following table summarizes the changes in the derivative liabilities during the six months ended December 31, 2018:
Fair Value Measurements Using Significant Observable Inputs (Level 3)
|
|
|
|
|
|
Balance - June 30, 2018
|
|
$
|
1,265,394
|
|
Addition of new derivatives recognized as debt discounts
|
|
|
694,393
|
|
Addition of new derivatives recognized as loss on derivatives
|
|
|
1,628,482
|
|
Settled upon conversion of debt and warrant (Derivative resolution)
|
|
|
(773,403
|
)
|
Loss on change in fair value of the derivative
|
|
|
1,619,776
|
|
Balance - December 31, 2018
|
|
$
|
4,434,642
|
|
The aggregate loss on derivatives during the six months ended December 31, 2018 and 2017 was as follows:
|
Six Months Ended
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
Addition of new derivatives recognized as loss on derivatives
|
|
$
|
1,628,482
|
|
|
$
|
165,931
|
|
Loss on change in fair value of the derivative
|
|
|
1,619,776
|
|
|
|
86,594
|
|
Total
|
|
$
|
3,248,258
|
|
|
$
|
252,525
|
|
Note 7 –LICENSING AND SERVICE AGREEMENTS
On June 4, 2018 the Company entered into an Exclusive Licensing Agreement with Optimized Fuel Technologies, a related party, for the right to exclusively sell the Optimized Fuel Maximizer internationally, with the exception of the United States and Canada. Consideration of $1,500 was paid for the licensing right in the form of one million five hundred thousand (1,500,000) shares of the Company’s common shares valued at $.001 per share which were authorized to be issued to Optimized Fuel Technologies; in addition, five hundred thousand dollars ($500,000) was to be paid over the course of 24 months which was paid as of September 30, 2018.
On June 20, 2018 the Company entered into an Exclusive Licensing Agreement Addendum with Optimized Fuel Technologies, a related party, for the right to exclusively sell the Optimized Fuel Maximizer worldwide. On June 4, 2018, the Company had entered into an Exclusive Licensing Agreement with Optimized Fuel Technologies for the right to exclusively sell the Optimized Fuel Maximizer internationally, with the exception of the United States and Canada; this agreement extends exclusive marketing right to include North America and Canada. Consideration of $1,000 was paid for the licensing rights under the addendum in the form of one million (1,000,000) shares of the Company’s common shares valued at $.001 per share which were authorized to be issued to Optimized Fuel Technologies.
On August 8, 2018 Optimized Fuel Technologies, a related party, entered into a contract with a company that desired to purchase the Optimized Fuel Maximizer on a manufacturer direct basis. As the Company owns the exclusive licensing rights to sales of the Optimized Fuel Maximizer; per the Royalty agreement dated August 27, 2018 the Company agreed to the acceptance of royalty revenue generated by sales which are made on a manufacturer direct basis.
On December 31, 2018 the exclusive North American distribution licensing rights for the
"Pro-Sun" LED Horticultural Grow Lamps were acquired from Optimized Fuel technologies for $500,000. An outstanding l
oan of $321,518 to Optimized Fuel Technologies was applied against the exclusive North American distribution licensing rights license for LED Lights in the amount of $500,000 leaving a remaining balance of $178,482 as an account payable to Optimized Fuel Technologies.
Note 8 - COMMON STOCK
The Company is authorized to issue seventy- five million shares of common stock with $0.001 par value.
As of December 31, 2018, there were 18,007,420 shares of common stock issued and outstanding. As of June 30, 2017, there were
17,829,947
shares of common stock issued and outstanding.
There were 177,473 shares of common stock issued during the six months ended December 31, 2018 and no stock issued 2017.
Note 9 – COMMITMENTS AND CONTINGENCIES
We have a twelve- month lease for office space at 2721 Loker Avenue West, Carlsbad, CA 92010 for $2,500 per month with Optimized Fuel Technologies, a related party. During the six months ended December 31, 2018 total rent expense paid was $15,000 and no rent was paid in 2017.
We pay our CEO a salary of $3,000 per month. During the six months ended December 31, 2018 total salary paid was $18,000 and no salary was paid during the three and six months ended December 31, 2017.
Note 10 - SUBSEQUENT EVENTS
Management has reviewed events between December 31, 2018 to the date that the financials were issued, and other than the following there were no other significant events identified for disclosure.
On January 11, 2019 a note payable was issued to Auctus Fund, LLC in the amount of $112,500 with an interest rate of 12% and maturity date of October 11, 2019. In addition, a Common Stock Purchase Warrant was issued for the purchase of up to 375,000 shares of Common Stock.
On January 22, 2019 a note payable was issued to GW Holdings Group, LLC in the amount of $69,000 with an interest rate of 12% and maturity date of January 22, 2020.
On February 5, 2019 the Company increased its authorized common stock shares from 75,000,000 to 150,000,000, in order to have sufficient shares available for reserve shares for Convertible Note holders and to have shares available for future acquisitions of new green technologies. This increase of authorized shares does not increase or decrease the shares outstanding.
From December 31, 2018 to February 6, 2019 the issued and outstanding shares have decreased from 18,007,420 to 9,618,732. There were 9,000,000 shares surrendered and returned to treasury and 661,113 new shares issued primarily as a result of Convertible Note conversions and warrant exercises.