Notes to Consolidated Financial Statements
At and for the Years Ended December 31, 2017
and 2016
NOTE 1 - ORGANIZATION OF OPERATIONS
Profile Solutions, Inc. (“Profile”) is a Delaware corporation
originally incorporated as YaFarm Technologies, Inc. on July 31, 2006.
On December 14, 2017, Profile entered into a Share Exchange Agreement
with Elite Products International, Inc., a Florida corporation (“Elite”) incorporated on February 15
th
,
2016 issuing an aggregate total of 600,000,000 shares in exchange for 100% ownership of Elite. As part of the transaction, the
Company filed a certificate of amendment with the State of Delaware increasing the authorized shares of common stock to 1,000,000,000
(one billion) shares of common stock. The transaction was accounted for as a corporate reorganization between entities under common
control. These consolidated financial statements reflect the reorganized capital structure retrospectively for all periods presented
for Profile and Elite, collectively (“the Company), the Company has presented earnings per share based on the Company shares
issued to the former shareholders of Elite.
Profile through its subsidiary Elite is a distributor
and manufacturer in the cannabinoid (CBD) industry. The Company’s products contain CBD Hemp extracts in the
form of edibles, creams, oils, and salves.
The Company’s fiscal year end is December 31. Essentially
all the operations of the Company are conducted through the Company’s wholly owned subsidiary in Sunrise, Florida.
Change in officers
On December 14, 2017, Officer and Director Dore S.
Perler resigned and appointed Dan Oran as Officer and Director.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and consolidation
The comparative amounts presented in these
consolidated financial statements are the historical results Elite for 2016 and for Elite and Profile for 2017 from the date of
the reorganization, all intercompany balances and transactions have been eliminated in consolidation. The Company’s accounting
policies used in the presentation of the accompanying consolidated financial statements conform to accounting principles generally
accepted in the United States of America (“US GAAP”) as promulgated by the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) and with the rules and regulations of the U.S. Securities and Exchange Commission
(“SEC”) and have been consistently applied.
Use of estimates and assumptions
The preparation of consolidated financial
statements in conformity with a US GAAP 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 reporting period.
The Company’s significant estimates
and assumptions include the fair value of financial instruments; income tax rate, income tax provision and valuation allowance
of deferred tax assets; stock-based compensation, valuation of inventory and the assumption that the Company will continue
as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are
uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly reviews its estimates
utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions.
After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those
estimates.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency to
quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The
three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
|
Level 1
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
|
Level 2
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
|
|
|
|
|
Level 3
|
Pricing inputs that are generally observable inputs and not corroborated by market data.
|
Financial assets are considered Level 3
when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least
one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the
categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s
financial assets and liabilities, such as cash, prepaid expenses, deposits, accounts payable and accrued expenses approximate their
fair value because of the short maturity of those instruments.
Transactions involving related parties
cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings
may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be
substantiated.
It is not however practical to determine
the fair value of advances from stockholders due to their related party nature.
Cash and cash equivalents
The Company considers all highly liquid
investments with a maturity of three months or less to be cash and cash equivalents. There were no cash and cash equivalents at
December 31, 2017 and 2016.
Related parties
The Company follows subtopic 850-10 of
the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the
related parties include (i) affiliates of the Company; (ii) Entities for which investments in their equity securities
would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity; (iii) trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of management; (iv) principal owners of the Company; (v)
management of the Company; (vi) other parties with which the Company may deal if one party controls or can significantly influence
the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and (vii) Other parties that can significantly influence the management or operating policies
of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence
the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
Commitments and contingencies
The Company follows subtopic 450-20 of the
FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date
the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when
one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against
the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal
proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of
the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are
generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe,
based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated
financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and
adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue recognition
The Company applies paragraph 605-10-S99-1
of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable
and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii)
the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company derives its revenues from sales
contracts with its customer with revenues being generated upon rendering of products. Persuasive evidence of an arrangement is
demonstrated via invoice; products are considered provided when the product is delivered to the customers; and the sales price
to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.
Accounts Receivable, net
The Company recognizes an allowance for losses on accounts receivable
in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad
debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer
accounts considered at risk or uncollectible. The Company recorded an allowance of doubtful accounts of $2,920 and $0, for the
years ended December 31, 2017 and 2016.
Inventories
Inventories are stated at the lower of cost or market using the
first in, first out (FIFO) method. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.
Costs of Revenue
Components of costs of revenue include product costs, shipping costs
to customers and any inventory adjustments.
Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers
as revenues and shipping and handling costs for shipments to customers as cost of revenues.
Income taxes
The Company is governed by the income tax laws of the United States
of America. The Company accounts for income tax using the liability method prescribed by ASC 740, “
Income Taxes
”.
Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and
tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected
to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence,
it is more-likely- than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred
taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company applies the provisions of ASC 740-10-50, “Accounting
for Uncertainty in Income Taxes”, which provides clarification related to the process associated with accounting for uncertain
tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has
passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment
to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations
for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of December 31,
2017, and, 2016, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.
The Company is subject to U.S. Federal income tax examinations for the tax years ended December 31, 2014 through 2016.
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act)
was enacted into law and the new legislation contains several key tax provisions that affected us, including a one-time mandatory
transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018,
among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the
transition tax, re-measuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred
tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting
Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period
not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing
guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the transition tax,
deferred tax re-measurements, and other items to be incomplete due to the forthcoming guidance and our ongoing analysis of final
year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118.
The Company’s ability to utilize its net operating loss (NOL)
carryforwards may be substantially limited due to ownership changes that may have occurred on December 14, 2017, as required by
Section 382 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state provisions. These ownership
changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax, respectively.
In general, an “ownership change,” as defined by Section 382 of the Code, results from a transaction or series
of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock
of a company by certain stockholders or public groups.
If the Company has experienced an ownership change, utilization
of the NOL carryforwards would be subject to an annual limitation, which is determined by first multiplying the value of the Company’s
stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional
adjustments, as required. Any such limitation may result in the expiration of a portion of the NOL carryforwards before utilization.
Until a study is completed, and any limitation known, no amounts are being considered as an uncertain tax position or disclosed
as an unrecognized tax benefit under ASC-740. Any carryforwards that expire prior to utilization as a result of such limitations
will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. Due to the existence of the
valuation allowance, it is not expected that any possible limitation will have an impact on the results of operations of the Company.
Tax returns for Profile Solutions, Inc. have not been prepared and
filed for the years ended December 31, 2016 and 2017 through 2018 and may be subject to penalties for delinquent and non-compliance
requirements, in addition, to the NOL carryover changes from prior years.
Net loss per common share
The Company follows ASC Topic 260 to account
for earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income
by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations
are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
There were no potentially dilutive shares
outstanding as of December 31, 2017.
Cash flows reporting
The Company adopted paragraph 230-10-45-24
of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether
they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect
or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards
Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from
operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals
of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating
cash receipts and payments.
Subsequent events
The Company follows the guidance in Section
855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company evaluates subsequent
events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards
Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users,
such as through filing them on EDGAR.
Recently issued accounting pronouncements
We have reviewed all new accounting
pronouncements and, except as set forth below, do not expect any new pronouncements or guidance to have an impact on our
results of operations or financial position:
All other newly issued accounting pronouncements,
but not yet effective, have been deemed either immaterial or not applicable.
NOTE 3 – LIQUIDTY AND GOING CONCERN
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying
consolidated financial statements, the Company had Revenues of $ 208,236 and $ 247,436, Loss from Operations of $ 42,495 and $
41,426 and net cash used in operations of $101,353 and $40,289 and for the years ended December 31, 2017 and December 31,
2016 respectively
While the Company is attempting to generate
sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations.
Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently
being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to
continue as a going concern. While the Company believes in the viability of its strategy to generate sufficient revenues and in
its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going
concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The consolidated financial statements do
not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The independent auditors’ report
on our consolidated financial statements for the years ended December 31, 2017 and 2016 contain explanatory paragraphs expressing
substantial doubt as to our ability to continue as a going concern.
NOTE 4 – RELATED PARTY TRANSACTIONS
In March 2016, Elite entered into a three-year lease agreement with
a related party for an aggregate rent of $46,091. This lease was amended in February 2018 for a monthly rent of approximately $4,000
with an annual escalation of 3% per year expiring on December 31, 2021 with the option to renew for two additional years. The Company
owed this related party approximately $5,000 as of December 31, 2017 and 2016, respectively. The amounts owed to this related party
were 45% and 75% of accounts payable as of December 31, 2017 and 2016, respectively.
Elite owed two related parties an aggregate of approximately $40,000
as of December 31, 2016. These amounts were repaid and converted to equity during 2017.
In November 2017, Elite entered into consulting agreements with
three related parties for a monthly fee of $7,500 for three years. Two of the three agreements call for a percentage of future
generations of sales and equity funding or acquisition of or by the Companies. Elite paid approximately $40,000 to these related
parties in 2017. In February 2018, Elite entered into an additional consulting agreement with a related party for a monthly fee
of $7,500 and 10% future generation of sales on a month to month basis.
Note 5 – CONCENTRATION ON CREDIT RISK
Major Customers
In 2017 and 2016, Elite had two customers that approximated 58%
of sales and four customers that approximated 72% of sales. One customer in 2017 is also a minority shareholder of the Company.
At December 31, 2017, the Company had a concentration of accounts
receivable from one customer, totaling 90%. This customer is also a minority shareholder of the Company.
Major Vendors
In 2017 and 2016, Elite had four vendors that approximated
57% of purchases and two vendors that approximated 70% of purchases.
NOTE 6 – EQUITY
As noted in Note one on December 14, 2017, the Company
acquired all of the issued and outstanding shares of Elite. The acquisition was accounted for as a recapitalization of the Company.
The former shareholders of Elite received 600,000,000 shares in the new parent entity Profile
Preferred Stock
The Company has 10,000,000 preferred shares authorized
with a par value of $0.001 per share with no issued and outstanding at December 31, 2017 and 2016.
Common Stock
The Company has 1,000,000,000 common shares authorized
with a par value of $0.001 per share with 757,233,793 and 600,000,000 shares issued and outstanding at December 31, 2017 and 2016.
During the year ended December 31, 2017, the
company issued 600,000,000 shares of common stock to former shareholders of Elite for 100% of the issued and outstanding
shares of Elite
NOTE 7 – PREPAID EXPENSES
Prepaid Expense represents the payment tendered to a manufacturer
to produce product. For the year ended December 31, 2017 and December 31
st
2016, the company had $ 12,539 and $ 0 respectively.
NOTE 8 - COMMITMENTS
Royalty agreements
On December 14, 2017, the Company entered
into a Royalty Agreement with former shareholders. The purpose of this Agreement is to develop produce, market, promote, distribute
and enhance the CannaSafe prototype. Royalty payments of 8 % will be tendered on a quarterly basis on February 1, May1, August
1 and November 1 of each year during the term of this agreement.
Lease agreements
On March 1, 2016 the Company’s wholly owned subsidiary, Elite
entered into a three year lease agreement in Sunrise, Florida through February 28, 2019 for aggregate rent of $46,091. The amount
is to be paid monthly over the term of the lease term along with 3 percent increases per annum. A deposit of $1,250 was tendered
to secure the lease.
Future minimum lease payments for this office space are as follows:
|
Year
|
|
|
Amount
|
|
2018
|
|
|
|
15,669
|
|
|
2019
|
|
|
|
2,662
|
|
|
|
|
|
$
|
18,331
|
|
Employment agreement
During the year ended December 31, 2017, the Company entered into
an employment agreement dated November 1, 2017 with the Company’s CEO. As part of this agreement, the Company agreed to annual
compensation of $ 90,000 with a 3-year term. Refer to Note 4 for additional future commitments related to this agreement.
Consulting agreements
During the year ended December 31, 2017, the Company entered into
two separate consulting agreements dated November 1, 2017. As part of these agreements, the Company agreed to annual compensation
of $ 90,000 each with 3-year terms. The Consultants will provide strategic business development ideas as well as public company
expertise and management. Refer to Note 4 for additional future commitments related to these agreements.
NOTE 9 – INCOME TAXES
The Company maintains deferred tax assets and liabilities that
reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The deferred tax assets at December 31, 2017 and 2016 consist of net operating
loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of the
attainment of future taxable income. The items accounting for the difference between income taxes at the effective statutory rate
and the provision for income taxes for the years ended December 31, 2017 and 2016 were as follows:
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
|
|
Expected tax (benefit) - Federal
|
|
$
|
(8,433
|
)
|
|
$
|
(14,085
|
)
|
|
Expected tax (benefit) - State
|
|
|
(2,337
|
)
|
|
|
(2,278
|
)
|
|
Tax effect of expenses that are not deductible for income tax purposes (net of other amounts deductible for tax purposes)
|
|
|
1,019
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
9,751
|
|
|
|
16,363
|
|
|
Total provision for income tax
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
The net deferred taxes in the accompanying balance sheets includes the following amounts of deferred tax assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Temporary Difference
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Net operating loss carryforwards
|
|
|
(20,253
|
)
|
|
|
(10,501
|
)
|
|
Total deferred tax assets
|
|
|
20,253
|
|
|
|
10,501
|
|
|
Less: valuation allowance
|
|
|
(20,253
|
)
|
|
|
(10,501
|
)
|
|
Net deferred tax asset recorded
|
|
$
|
—
|
|
|
$
|
—
|
|
The estimated net operating loss carryforward was approximately
$79,900 at December 31, 2017. The Company’s net operating loss carryforward may be limited on the usage of such net operating
loss carryforwards due to a change in ownership in accordance with Section 382 of the Internal Revenue Code. The Company provided
a valuation allowance equal to the net deferred income tax asset for the year ended December 31, 2017 and 2016 because it was not
known whether future taxable income will be sufficient to utilize the loss carryforward. The increase in the valuation allowance
was $20,253 from the year ended December 31, 2016. The potential tax benefit arising from tax loss carryforwards will expire in
2037.
NOTE 10 – SUBSEQUENT EVENTS
On February 1, 2018 the Company’s wholly owned subsidiary,
Elite entered into a three year lease agreement in Sunrise, Florida commencing February 28, 2018 through December 31, 2021 for
an annual rent totaling $51,996 with annual increase of 3 percent. The amount is to be paid monthly over the term of the lease
term. A deposit of $4,333 was tendered to secure the lease.
Between January 1, and February 23, 2018, the Company raised gross
proceeds of $520,000 from subscription agreements between $0.035 to $0.05 per share.
On March 2, 2018, the Company issued 714,286 shares with a fair
value of $25,000 ($0.035/share) to a consultant as consideration for consulting services.
The Company’s total issued and outstanding shares of common
stock as August 31, 2018 is 772,633,793
On June 15, 2018, the Company entered into Royalty Participation
Agreement with Stemtech Corporation. The Company loaned $100,000 to Stemtech Corporation to be used as working capital. The loan
is interest free and due twelve months from the effective date. In consideration for the $100,000 loan from the Company Stemtech
will pay a percentage from the sales, licensing or disposition of its products or other revenue. The royalty payments equal the
greater of $10,000 or one percent of all “gross revenue” received by the company during the month based on (i) the
sale, license, development, commercialization or monetization of the products and (ii) all gains on disposition of any products
or assets or other income until the earlier of (A) the closing of the Reorganization and purchase and Sale Agreement between the
Stemtech Corporation and the Company or (B) 12 months from execution of this agreement.
On June 22, 2018, the Company entered into Royalty Participation
Agreement with Stemtech Corporation. The Company loaned $50,000 to Stemtech Corporation to be used as working capital. The loan
is interest free and due twelve months from the effective date. In consideration for the $50,000 loan from the Company, Stemtech
will pay a percentage from the sales, licensing or disposition of its products or other revenue. The royalty payments equal the
greater of $5,000 or one half percent of all “gross revenue” received by the company during the month based on (i)
the sale, license, development, commercialization or monetization of the products and (ii) all gains on disposition of any products
or assets or other income until the earlier of (A) the closing of the Reorganization and purchase and Sale Agreement between the
Stemtech Corporation and the Company or (B) 12 months from execution of this agreement.
[Remainder of page left blank.]
PROFILE SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30, 2018 (unaudited) and December 31, 2017
|
ASSETS
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
|
Current Assets:
|
|
(unaudited)
|
|
|
|
Cash
|
|
$
|
194,425
|
|
|
$
|
47,857
|
|
|
Accounts receivable, net
|
|
|
71,555
|
|
|
|
59,917
|
|
|
Loan receivable
|
|
|
150,000
|
|
|
|
—
|
|
|
Prepaid expenses
|
|
|
59,653
|
|
|
|
12,539
|
|
|
Inventory
|
|
|
101,045
|
|
|
|
16,650
|
|
|
Total current assets
|
|
|
576,678
|
|
|
|
136,963
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
10,378
|
|
|
|
1,250
|
|
|
Total other assets
|
|
|
10,378
|
|
|
|
1,250
|
|
|
Total Assets
|
|
$
|
587,056
|
|
|
$
|
138,213
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
55,894
|
|
|
$
|
32,634
|
|
|
Total current liabilities
|
|
|
55,894
|
|
|
|
32,634
|
|
|
Total liabilities
|
|
|
55,894
|
|
|
|
32,634
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares, par value $0.001 per share, 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2018 and December 31, 2017 respectively
|
|
|
—
|
|
|
|
—
|
|
|
Common stock, par value $0.001 per share, 1,000,000,000 shares authorized; 772,808,793 and 757,233,793 shares issued and outstanding as of June 30, 2018 and December 31, 2017 respectively
|
|
|
772,809
|
|
|
|
757,234
|
|
|
Additional paid-in capital
|
|
|
117,341
|
|
|
|
(567,734
|
)
|
|
Accumulated deficit
|
|
|
(358,988
|
)
|
|
|
(83,921
|
)
|
|
Total stockholders’ equity
|
|
|
531,162
|
|
|
|
105,579
|
|
|
Total Liabilities and Stockholder’s Equity
|
|
$
|
587,056
|
|
|
$
|
138,213
|
|
The notes are an integral part of these
condensed consolidated financial statements.
PROFILE SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
|
|
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
Consolidated
|
|
Consolidated
|
|
Consolidated
|
|
Consolidated
|
|
Revenue
|
|
$
|
170,600
|
|
|
$
|
12,860
|
|
|
$
|
432,877
|
|
|
$
|
33,183
|
|
|
Cost of revenues
|
|
|
79,668
|
|
|
|
50,538
|
|
|
|
180,587
|
|
|
|
51,683
|
|
|
Gross Profit
|
|
|
90,932
|
|
|
|
(37,678
|
)
|
|
|
252,290
|
|
|
|
(18,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation - officers
|
|
|
25,346
|
|
|
|
—
|
|
|
|
25,346
|
|
|
|
—
|
|
|
General and administrative
|
|
|
126,848
|
|
|
|
5,934
|
|
|
|
383,803
|
|
|
|
60,312
|
|
|
Professional fees
|
|
|
111,780
|
|
|
|
—
|
|
|
|
118,209
|
|
|
|
—
|
|
|
Total operating expenses
|
|
|
263,974
|
|
|
|
5,934
|
|
|
|
527,358
|
|
|
|
60,312
|
|
|
Loss from operations
|
|
|
(173,042
|
)
|
|
|
(43,612
|
)
|
|
|
(275,068
|
)
|
|
|
(78,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before provision for income taxes
|
|
|
(173,042
|
)
|
|
|
(43,612
|
)
|
|
|
(275,068
|
)
|
|
|
(78,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(173,042
|
)
|
|
$
|
(43,612
|
)
|
|
$
|
(275,068
|
)
|
|
$
|
(78,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share - Basic and Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
772,656,870
|
|
|
|
107,585,747
|
|
|
|
770,599,776
|
|
|
|
107,585,747
|
|
The notes are
an integral part of these financial statements.
PROFILE SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the Six Months Ended June 30, 2018 (unaudited) and December 31, 2017
|
|
|
Six Months Ended
|
|
Year Ended
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
|
|
(unaudited)
|
|
|
|
Cash Flow From Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(275,067
|
)
|
|
$
|
(42,495
|
)
|
|
Adjustments to reconcile net loss to net cash from operating activities:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
25,000
|
|
|
|
—
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Increase in prepaid expenses
|
|
|
(56,242
|
)
|
|
|
(12,539
|
)
|
|
Increase in inventory
|
|
|
(84,395
|
)
|
|
|
(12,124
|
)
|
|
Increase in accounts receivable
|
|
|
(11,638
|
)
|
|
|
(59,917
|
)
|
|
Increase in accounts payable
|
|
|
23,260
|
|
|
|
25,722
|
|
|
Net Cash Used in Operating Activities
|
|
|
(379,082
|
)
|
|
|
(101,353
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Issuance of note receivable
|
|
|
(150,000
|
)
|
|
|
—
|
|
|
Net Cash Used in Investing Activities
|
|
|
(150,000
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from advances from related party
|
|
|
—
|
|
|
|
80,366
|
|
|
Repayment of advances from related party
|
|
|
—
|
|
|
|
(29,541
|
)
|
|
Contributions
|
|
|
—
|
|
|
|
35,000
|
|
|
Distributions
|
|
|
—
|
|
|
|
(38,270
|
)
|
|
Net cash received from stock sold
|
|
|
527,000
|
|
|
|
—
|
|
|
Net cash received as part of deposit in transit
|
|
|
148,650
|
|
|
|
101,585
|
|
|
Net Cash Provided by Financing Activities
|
|
|
675,650
|
|
|
|
149,140
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease in Cash)
|
|
|
146,568
|
|
|
|
47,787
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash - Beginning of Period
|
|
|
47,857
|
|
|
|
70
|
|
|
Cash - End of Period
|
|
$
|
194,425
|
|
|
$
|
47,857
|
|
The notes are an integral part of these
financial statements.
PROFILE SOLUTIONS, INC.
Condensed Notes to Consolidated Financial Statements
June 30, 2018
(unaudited)
NOTE 1 - ORGANIZATION OF OPERATIONS
Profile Solutions, Inc. (“Profile”) is a Delaware corporation
originally incorporated as YaFarm Technologies, Inc. on July 31, 2006.
On December 14, 2017, Profile entered into a Share Exchange Agreement
with Elite Products International, Inc., a Florida corporation (“Elite”) incorporated on February 15
th
,
2016 issuing an aggregate total of 600,000,000 shares in exchange for 100% ownership of Elite. As part of the transaction, the
Company filed a certificate of amendment with the State of Delaware increasing the authorized shares of common stock to 1,000,000,000
(one billion) shares of common stock. The transaction was accounted for as a corporate reorganization between entities under common
control. These consolidated financial statements reflect the reorganized capital structure retrospectively for all periods presented
for Profile and Elite, collectively (“the Company), the Company has presented earnings per share based on the Company shares
issued to the former shareholders of Elite.
Profile through its subsidiary Elite is a distributor
and manufacturer in the cannabinoid (CBD) industry. The Company’s products contain CBD Hemp extracts in the
form of edibles, creams, oils, and salves.
The Company’s fiscal year end is December 31. Essentially
all the operations of the Company are conducted through the Company’s wholly owned subsidiary in Sunrise, Florida.
Change in officers
On December 14, 2017, Officer and Director Dore S.
Perler resigned and appointed Dan Oran as Officer and Director.
The Company’s fiscal year end
is December 31. Essentially all the operations of the Company are conducted through the Company’s subsidiary Elite.
Change in officers
On December 14, 2017, former Officer and Director Dore
S. Perler resigned and appointed Dan Oran as Officer and Director.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and consolidation
The Company’s condensed consolidated financial statements
have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Accordingly, they
do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.
In our opinion the unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring
accruals) necessary to make the unaudited condensed consolidated financial statements not misleading. Operating results for the
three and six months ended June 30, 2018 are not necessarily indicative of the final results that may be expected for the
year ending December 31, 2018. For more complete financial information, these unaudited condensed financial statements should be
read in conjunction with the audited financial statements for the year ended December 31, 2017. A summary of our significant
accounting policies consistently applied in the preparation of the accompanying condensed consolidated financial statements follows.
Principle of consolidation
All intercompany balances and transactions
have been eliminated on consolidation.
Use of estimates and assumptions
The preparation of consolidated 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 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 reporting period.
The Company’s significant estimates
and assumptions include the fair value of financial instruments; the carrying value, recoverability and impairment, if any, of
long-lived assets, including the values assigned to and the estimated useful lives of fixed assets; income tax rate, income tax
provision and valuation allowance of deferred tax
assets; stock-based compensation, valuation
of inventory and the assumption that the Company will continue as a going concern.
Those significant accounting estimates
or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions,
and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly reviews its estimates
utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions.
After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those
estimates.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency ’ to
quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
|
Level 1
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
|
Level 2
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
|
|
|
|
|
Level 3
|
Pricing inputs that are generally observable inputs and not corroborated by market data.
|
Financial assets are considered Level 3
when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least
one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the
categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s
financial assets and liabilities, such as cash, prepaid expenses, deposits, accounts payable and accrued expenses approximate their
fair value because of the short maturity of those instruments.
Transactions involving related parties
cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings
may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be
substantiated.
It is not however practical to determine
the fair value of advances from stockholders due to their related party nature.
Cash and cash equivalents
The Company considers all highly liquid
investments with a maturity of three months or less to be cash and cash equivalents.
Related parties
The Company follows subtopic 850-10 of
the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the
related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company;
e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence
the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies
of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence
the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
Commitments and contingencies
The Company follows subtopic 450-20 of the
FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date
the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when
one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently
involves an exercise of Judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company
or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of
the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are
generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe,
based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated
financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and
adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue recognition
The Company applies paragraph 605-10-S99-1
of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable
and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii)
the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company derives its revenues from sales
contracts with its customer with revenues being generated upon rendering of products. Persuasive evidence of an arrangement is
demonstrated via invoice; products are considered provided when the product is delivered to the customers; and the sales price
to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.
Accounts
Receivable, net
The Company recognizes an allowance for losses
on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis
of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific
identifiable customer accounts considered at risk or uncollectible. The Company recorded an allowance of doubtful accounts of $2,920
and $0, for the six months ended June 30, 2018 and 2017.
Inventories
Inventories are stated at the lower of cost or market using the
first in, first out (FIFO) method. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.
Costs of Revenue
Components of costs of sales include product costs, shipping costs
to customers and any inventory adjustments.
Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers
as revenues and shipping and handling costs for shipments to customers as cost of revenues.
Income taxes
The Company is governed by the income tax laws
of the United States of America. The Company accounts for income tax using the liability method prescribed by ASC 740, “
Income
Taxes
”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial
reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences
are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available
evidence, it is more-likely- than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on
deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company applies the provisions of ASC 740-10-50, “Accounting
for Uncertainty in Income Taxes”, which provides clarification related to the process associated with accounting for uncertain
tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has
passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment
to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations
for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of June 30, 2018,
and December 31, 2017, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the
future. The Company is subject to U.S. Federal income tax examinations for the tax years ended December 31, 2014 through 2016.
On December 22, 2017, the 2017 Tax Cuts and
Jobs Act (the Tax Act) was enacted into law and the new legislation contains several key tax provisions that affected us, including
a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective
January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such
as determining the transition tax, re-measuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability
of our deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income
Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a
measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter
of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of
the transition tax, deferred tax re-measurements, and other items to be incomplete due to the forthcoming guidance and our ongoing
analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance
with SAB 118.
The Company’s ability to utilize its
net operating loss (NOL) carryforwards may be substantially limited due to ownership changes that may have occurred on December
14, 2017, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state
provisions. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable
income and tax, respectively. In general, an “ownership change,” as defined by Section 382 of the Code, results
from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent
of the outstanding stock of a company by certain stockholders or public groups.
If the Company has
experienced an ownership change, utilization of the NOL carryforwards would be subject to an annual limitation, which is determined
by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt
rate, and then could be subject to additional adjustments, as required. Any such limitation may result in the expiration of a portion
of the NOL carryforwards before utilization. Until a study is completed, and any limitation known, no amounts are being considered
as an uncertain tax position or disclosed as an unrecognized tax benefit under ASC-740. Any carryforwards that expire prior to
utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation
allowance. Due to the existence of the valuation allowance, it is not expected that any possible limitation will have an impact
on the results of operations of the Company
.
Tax returns for Profile Solutions, Inc. have
not been prepared and filed for the years ended December 31, 2016 and 2017 through 2018 and may be subject to penalties for delinquent
and non-compliance requirements, in addition, to the NOL carryover changes from prior years.
Net loss per common share
The Company follows ASC Topic 260 to account
for earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income
by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations
are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
There were no potentially dilutive shares
outstanding as of June 30, 2018.
Cash flows reporting
The Company adopted paragraph 230-10-45-24
of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether
they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect
or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards
Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from
operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals
of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating
cash receipts and payments.
Recently issued accounting pronouncements
We have reviewed all new accounting pronouncements
and, except as set forth below, do not expect any new pronouncements or guidance to have an impact on our results of operations
or financial position.
All other newly issued accounting pronouncements,
but not yet effective, have been deemed either immaterial or not applicable.
Note 3 –Liquidity and Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying
consolidated financial statements, the Company had an accumulated deficit of $358,988 at June 30, 2018, a net loss of $275,068
and net cash used in operating activities of $379,082 for the six months ended June 30, 2018.
While the Company is attempting to generate
sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations.
Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently
being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to
continue as a going concern. While the Company believes in the viability of its strategy to generate sufficient revenues and in
its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going
concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The consolidated financial statements do
not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 – RELATED PARTY TRANSACTIONS
In March 2016, Elite
entered into a three-year lease agreement with a related party for an aggregate rent of $46,091. This lease was amended in February
2018 for a monthly rent of approximately $4,000 with an annual escalation of 3% per year expiring on December 31, 2021 with the
option to renew for two additional years. The Company owed this related party approximately $5,000 as of June 30, 2018 and December
31, 2017, respectively. The amounts owed to this related party were 15% and 45% of accounts payable as of June 30, 2018 and December
31, 2017, respectively.
Elite owed two related
parties an aggregate of approximately $40,000 as of December 31, 2016. These amounts were repaid and converted to equity during
2017.
In November 2017,
Elite entered into consulting agreements with three related parties for a monthly fee of $7,500 for three years. Two of the three
agreements call for a percentage of future generations of sales and equity funding or acquisition of or by the Companies. Elite
paid approximately $40,000 to these related parties in 2017. In February 2018, Elite entered into an additional consulting agreement
with a related party for a monthly fee of $7,500 and 10%
future generation of sales on a month to month basis
On March 31, 2018, $80,000 was paid as a good
faith refundable deposit for a potential acquisition by the Company.
On May 14, 2018, the $ 80,000 deposit was paid
back to the Company.
NOTE 5 - CONCENTRATION ON CREDIT
RISK
Major Customers
During the six months ended June 30, 2018 and
2017, Elite had one customer that approximated 35% of sales and one customers that approximated 26% of sales, respectively. One
customer in 2018 is also a minority shareholder of the Company.
At June 30, 2018 the Company had a concentration
of accounts receivable from two customers, totaling 79%. One customer is also a minority shareholder of the Company.
At December 31, 2017, the Company had a concentration
of accounts receivable from one customer, totaling 90%. This customer is also a minority shareholder of the Company.
Major Vendors
During the six months ended June
30, 2018 and 2017, Elite had four vendors that approximated
59% of purchases and four vendors
that approximated 73% of purchase, respectively.
NOTE 6 – EQUITY
As noted in Note one on December
14, 2017, the Company acquired all of the issued and outstanding shares of Elite. The acquisition was accounted for as a recapitalization
of the Company. The former shareholders of Elite received 600,000,000 shares in the new parent entity Profile
Preferred Stock
The Company has 10,000,000 preferred
shares authorized with a par value of $0.001 per share with no issued and outstanding at June 30, 2018 and December 31, 2017.
Common Stock
The Company has 1,000,000,000
common shares authorized with a par value of $0.001 per share with 772,808,793 and 757,233,793 shares issued and outstanding at
June 30, 2018 and December 31, 2017.
For the six months ended June 30, 2018, the
Company issued 14,860,714 shares of common stock in consideration of $527,000 pursuant to certain subscription agreements. In addition,
714,286 shares of the Company’s common stock were issued for services rendered with a fair value of $25,000.
During the year ended December
31, 2017, the company issued 600,000,000 shares of common stock to former shareholders of Elite for 100% of the issued and outstanding
shares of Elite
NOTE 7 – PREPAID EXPENSES
Prepaid Expense represents the payment tendered
to a manufacturer to produce product. For the six months ended June 30, 2018 and year ended December 31, 2017, the company had
$59,653 and $12,539 respectively
NOTE 8 – LOAN RECEIVABLE
On June 15, 2018, the Company entered into Royalty Participation
Agreement with Stemtech Corporation. The Company loaned $100,000 to Stemtech Corporation to be used as working capital. The loan
is interest free and due twelve months from the effective date. In consideration for the $50,000 loan from the Company Stemtech
will pay a percentage from the sales, licensing or disposition of its products or other revenue. The royalty payments equal to
the great of $10,000 or one percent of all “gross revenue” received by the company during the month based on (i) the
sale, license, development, commercialization or monetization of the products and (ii) all gains on disposition of any products
or assets or other income until the earlier of (A) the closing of the Reorganization and purchase and Sale Agreement between the
Stemtech Corporation and the Company or (B) 12 months from execution of this agreement.
On June 22, 2018, the Company entered into Royalty Participation
Agreement with Stemtech Corporation. The Company loaned $50,000 to Stemtech Corporation to be used as working capital. The loan
is interest free and due twelve months from the effective date. In consideration for the $50,000 loan from the Company Stemtech
will pay a percentage from the sales, licensing or disposition of its products or other revenue. The royalty payments equal to
the great of $5,000 or one half percent of all “gross revenue” received by the company during the month based on (i)
the sale, license, development, commercialization or monetization of the products and (ii) all gains on disposition of any products
or assets or other income until the earlier of (A) the closing of the Reorganization and purchase and Sale Agreement between the
Stemtech Corporation and the Company or (B) 12 months from execution of this agreement.
For the six months ended June 30, 2018, the Company recorded loan
receivable of $150,000.
NOTE 9 - COMMITMENTS
Royalty agreements
On December 14, 2017, Profile Solutions,
Inc. entered into a Royalty Agreement with a group of unrelated investors. The purpose of this Agreement is for Profile Solutions
to utilize this license to develop produce, market, promote, distribute and enhance the existing prototype for its use within
the United States of America. Royalty payments will be tendered on a quarterly basis beginning February 1, May1, August 1, and
November 1 of each year during the term of this agreement.
Lease agreements
On February 1, 2018 the Company’s entered into a three year
lease agreement with a related party in Sunrise, Florida commencing February 1, 2018 through January 31, 2021 for aggregate rent
of $155,988 The amount is to be paid monthly over the term of the lease term along with 3 percent increases per annum. A deposit
of $1,250 was tendered to secure the lease.
Future minimum lease payments for this office
space are as follows:
|
Year
|
|
Amount
|
|
2018
|
|
|
|
47,663
|
|
|
2019
|
|
|
|
51,996
|
|
|
2020
|
|
|
|
51,996
|
|
|
2021
|
|
|
|
4,333
|
|
|
|
|
|
$
|
155,988
|
|
Employment agreement
During the year ended December 31, 2017, the
Company entered into an employment agreement dated November 1, 2017 with the Company’s wholly owned subsidiary CEO. As
part of this agreement, the Company agreed to annual compensation of $ 90,000 with a 3-year term. On May 1, 2018, the Agreement
has been modified to annual compensation of $48,000 plus 5% of sales over $50,000 per month. Refer to Note 4 for additional future
commitments related to this agreement.
Consulting agreements
During the year ended December 31, 2017, the
Company entered into two separate consulting agreements dated November 1, 2017. As part of these agreements, the Company agreed
to annual compensation of $ 90,000 each with 3-year terms. The Consultants will provide strategic business development ideas as
well as public company expertise and management. Refer to Note 4 for additional future commitments related to these agreement.
In
February 2018, Elite entered into an additional consulting agreement with a related party for a monthly fee of $7,500 and 10%
future generation of sales on a month to month basis.
On March 2, 2018, the Company entered into
an Advisory Board Agreement with an individual that has expertise in the Hemp business and also has expertise in public companies.
This agreement is for four months and consideration is for $25,000 worth of the Company’s common stock payable at $0.035
a share.
[Outside back cover of prospectus]
Dealer Prospectus
Delivery Obligation
Until (
insert date
), all dealers that effect transactions
in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition
to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments
or subscriptions.
Profile Solutions, Inc.
167,583,443 Shares of Common Stock Prospectus
___________, 2018
