OPTI Optec International Inc (PK)

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED December 31, 2017 AND 2016

 

Note 1 – NATURE OF OPERATIONS

Optec International, Inc. (Formerly Green Meadow Products, Inc. "the Company", "GMP", "we", "us" or "our") was incorporated under the laws of the State of Wyoming on June 22, 2012.

Our current focus is on the sales of licensing rights to our Green Meadow PR formula and the manufacturing and sales of our Green Meadow PR formula, both of which are organic products, as well as the manufacturing and sales of our PawPal product and our recently acquired stress relief formula. We have also tested and sold organic dog treats which contain our pain relief formula and are currently seeking funding sources for the manufacturing of the dog treats as well as our pain relief product for dogs. We have also produced formulas for energy bars.

We made a decision to review additional potential products for marketing and distribution in what we consider to be the "Green Sector" or "environmentally friendly". As a result, we acquired seven Optec Fuel Maximizer devices for vehicles for testing; comprised of 2 HD Optec Fuel Maximizers, 2 Intermediate Optec Fuel Maximizers, 1 Optec Fuel Maximizer for gas passenger cars, 1 Optec Fuel Maximizer for diesel passenger cars. We have subsequently sold the devices and have made additional sales of the Optec Fuel Maximizer devices internationally in the first quarter of 2017. The Optec Fuel Maximizer is an on demand technology designed for computer controlled gasoline and diesel engines for improved fuel efficiency while simultaneously reducing harmful emissions. We believe that the technology can reduce greenhouse gas emissions which in turn could conceivably aid in making the air much healthier in our cities.

As a result of the Company's testing of the devices which we determined to have met the claims of the manufacturer Optimized Fuel Technologies, and sales of the device internationally we have entered into a distributor  agreement with Optimized Fuel Technologies and have changed the Company's name from Green Meadow Products, Inc. to Optec International, Inc. which we believe will better serve the Company's future plans. ( For further information on Optec Products acquired-www.optecmpg.com )

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 accompanying condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements.  Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles.  The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in Note 2 to the Notes to Financial Statements included in our Annual Report on form 10-K for the year ended June 30, 2017.

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, 2017 and 2016.

During the six months ended December 31, 2017 and 2016, the following vendors represented more than 10% of the Company's Purchases:

*Total purchase was comprised of $58,326 from Optimized Fuel Technologies

 

 

INVENTORY

Inventory is recorded at lower of cost or market; cost is computed on a first-in first-out basis.

FAIR VALUE OF FINANCIAL INSTRUMENTS

As defined in ASC 820" Fair  Value Measurements,"  fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

The following table summarizes fair value measurements by level at December 31, 2017 and June 30, 2017, measured at fair value on a recurring basis:

 

Convertible notes

 

Convertible notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized as additional paid-in capital and included in equity, net of income tax effects, and is not subsequently remeasured. After initial measurement, they are carried at amortized cost using the effective interest method.

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

 

 

WEBSITE DEVELOPMENT COSTS

Under ASC350-50, Website Development Costs, costs and expenses incurred during the planning and operating stages of the Company's website are expensed as incurred. Under ASC 350-50, costs incurred in the website application and infrastructure development stages are capitalized by the Company and amortized to expense over the website's estimated useful life or period of benefit which is estimated to be 5 years.

OTHER INTANGIBLE ASSETS

Under ASC 350-50-1, costs incurred in the acquisition of an intangible asset are capitalized by the Company. As of December 31, 2017, and 2016 our intangible asset related to the purchase of our Green Meadow PR formula for natural pain relief for animals and 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.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates the recoverability of long-lived 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.

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

The Company recognizes revenue in accordance with Accounting Standards Codification No. 605, "Revenue Recognition" ("ASC-605") ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

 

 

The Company's revenues have been generated primarily through sublicense and distribution agreements related to our PawPal product and our pain relief products as well as sales of the Optec Fuel Maximizer devices. 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 six months  ended December 31, 2017 and 2016, all 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 AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

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.

ADVERTISING COSTS

The Company's policy regarding advertising is to expense advertising when incurred.  For the three months and six months ended December 31, 2017 and December 31, 2016 the Company had no advertising costs.

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.

The Company has no potentially dilutive debt or equity instruments issued and outstanding for the three months and six months ended December 31, 2017 and December 31, 2016.

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 other than in respect of the early adoption of the new regulations relating to Development Stage Entities as discussed above.

 

 

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 at December 31, 2017, the Company had yet to establish a proven, reliable, recurring source of revenue to fund its ongoing operating costs and with 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 ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

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.

During the six months ended December 31, 2017 and 2016, the Company recognized amortization discount, included in interest expense, of $42,257 and $0, respectively. During the six months and three months ended December 31, 2017 and 2016, the Company recognized amortization discount, included in interest expense, of $42,257 and $0, respectively.

Promissory Notes - Issued in fiscal year 2018

During the six months ended December 31, 2017, the Company issued a total of $243,000 promissory notes ("Notes") with the following terms:

The Company identified conversion features embedded within certain notes and warrants issued during the six months ended December 31, 2017. 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. On issuance, the warrants are exercisable into 20,057 shares of common stock, for a period of five years from issuance, at a price of $3.45 per share. As a result of the reset features, at December 31, 2017, the warrants increased by 8,943 and the total warrants exercisable into 29,000 shares of common stock at $1.50 per share which are potentially dilutive for loss per share disclosure, but the dilution is immaterial   . 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.

 

 

 

The following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2017:

 

 

NOTE  5 - 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, 2017. 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, 2017, the estimated fair values of the liabilities measured on a recurring basis are as follows:

The following table summarizes the changes in the derivative liabilities during the six months ended December 31, 2017:

The aggregate loss on derivatives during the six months ended December 31, 2017 and 2016 was $252,525 and $0, respectively. The aggregate loss on derivatives during the three months ended December 31, 2017 and 2016 was $252,525 and $0, respectively.

Note 6 –LICENSING AND SERVICE AGREEMENTS 

On August 28, 2017 we sold a non-exclusive formula for energy bars to Belu Organics, Inc. for $4,500.

Note 7 - RELATED PARTY TRANSACTIONS

On October 4, 2017 ("The Effective Time"), Stan Windhorn resigned as Secretary of the Company and Peter Sollenne, a consultant and acting CEO and CFO was elected as Secretary. As a result of Stan Windhorn's resignation his 49,700,000 shares were cancelled and an option agreement was entered into between the Company and Stan Windhorn for the purchase of one million shares of common stock at $5.00 per share , which were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive . Stan Windhorn's resignation was not the result of any disagreement on any matter relating to the Company's operation, policies (including accounting or financial policies) or practices.

On October 4, 2017 tweve million (12,000,000) shares of common stock were authorized to be issued to Peter Sollenne as a bonus for his appointment as an officer and director of the Company.

On October 4, 2017 four million (4,000,000) shares were authorized to be issued to Marcus Pawson as Vice President of International Sales.

 

 

Note 8 - COMMITMENTS AND CONTINGENCIES

Contractual obligations

On November 7, 2017 we issued a note to St. George Investments LLC for $87,500 at a 10% interest rate and maturity date of July 7, 2018. There were $17,500 in fees associated with the note resulting in a net amount to us of $70,000.

On November 10, 2017 we issued a note to Power Up Lending for $43,000 at a 12% interest rate and maturity date of August 30, 2018.  There were $3,000 in fees associated with the note resulting in a net amount to us of $40,000.

On November 24, 2017 we issued a note to Auctus for $112,500 at a 12% interest rate and maturity date of August 24, 2018. There were $12,000 in fees associated with the note resulting in a net amount to us of $100,500.

Litigation

We were not subject to any legal proceedings during the quarters ended December 31, 2017 or 2016 and no legal proceedings are currently pending or threatened to the best of our knowledge.

Note 9 - COMMON STOCK

The Company is authorized to issue seventy- five million shares of common stock with $0.001 par value.

On October 4, 2017, 49,700,000 shares of common stock were retired resulting from the resignation of Stan Windhorn as an officer and director and options to purchase 1,000,000 shares of common stock at $5.00 were issued.

On October 4, 2017 twelve million (12,000,000) shares of common stock were authorized to be issued to Peter Sollenne for services valued at $4,000 ($.001 per share) as a bonus for his appointment as an officer and director of the Company.

On October 4, 2017 four million (4,000,000) shares were authorized to be issued to Marcus Pawson as Vice President of International Sales for services valued at $4,000 ($.001 per share).

As of December 31,2017, there were 19,245,000 shares of common stock issued and outstanding. As of December 31, 2016, there were 52,944,500 shares of common stock issued and outstanding.