Indicate by check mark if the registrant is
a well-known seasoned issuer as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained,
to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this form 10-K or any amendment to this form 10-K.
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,”“accelerated filer”and “smaller reporting company”in Rule 12b-2
of the Exchange Act.
If an emerging growth company, indicate by
check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant
has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a court.
Indicate the number of shares outstanding of
each of the issuer’s classes of common stock, as of the latest practicable date.
As of the date of this filing, there were 62,542,181
shares of the Issuer’s common stock issued and outstanding and held by approximately 116 shareholders, six of which
are deemed affiliates within the meaning of Rule 12b-2 under the Exchange Act.
As of the date of this filing, there were 30,000
shares of the Issuer’s preferred stock issued and outstanding.
The aggregate market value of the 47,192,181
shares of voting common equity held by non-affiliates of the registrant, computed by reference to the closing price as reported
as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2017) was approximately
$755,074.
PART III
ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our directors and officers, as of the
date of this filing, are set forth below. The directors hold office for their respective term and until their successors are duly
elected and qualified. Vacancies in the existing Board are filled by a majority vote of the remaining directors. The officers serve
at the will of the Board of Directors.
(a) & (b) Directors and executive
officers
:
Name
|
Age
|
Position
|
Director Since
|
Mark Carten
|
65
|
CTO & Director
|
April 19, 2017
|
Lynnwood Farr
|
76
|
Director
|
March 30, 2017
|
Enrico Giordano
|
59
|
Vice President & Director
|
Inception
|
Christopher Jackson
|
53
|
President, Sec., Treas. & Director
|
Inception
|
Rex Schuette
|
68
|
Director
|
September 25, 2017
|
The directors of the Company are elected
to serve until the next annual shareholders' meeting or until their respective successors are elected and qualified. Officers of
the Company hold office until the meeting of the Board of Directors immediately following the next annual shareholders' meeting
or until removal by the Board of Directors.
(c)
Identification
of certain significant employees
.
As of December 31, 2017, there were no
persons who were not directors and/or executive officers that were expected to make significant contributions to the business of
the Company.
(d)
Family
relationships
.
There are no family relationships between
any directors and/or executive officers.
(e) The
business experience of the directors and executive officers.
Mark Carten.
Mr. Carten is an owner
of CartenTech, LLC and has been the driving force behind his company which has: developed communication kiosks for airports and
military bases in Europe; developed photographic, computer hardware and software systems for counter intelligence uses in multiple
countries for various government agencies, developed 3D laser measuring systems for the fiber optic and plastic injection molding
industries; and developed over one-hundred websites and on-line database systems for various clients in the both the United States
and Europe. Mr. Carten is the developer of the Company’s CyberloQ™ technology as well.
Lynnwood Farr.
Mr. Farr brings
a long and distinguished business acumen to the Company’s Board of Directors, and has been a leader in multiple industries
over his storied career. Starting with General Dynamics of Canada as head of security in the mid 1960’s, Mr. Farr advanced
himself all the way to CEO of General Dynamics of Canada by the 1980’s. Mr. Farr also directed Victor Shipbuilding in Canada,
where he served as CEO and had oversight responsibility for the building of multi-million dollar submarines from start to finish
procurement. His attention to detail has always been a big part of his success, and he received the highest of military security
clearances during his tenures. More recently, Mr. Farr has served as the Chairman and President of XCELL since 2007, and he is
the current President of SVT as well.
Enrico Giordano.
Mr. Giordano is
a founder and holds a BA degree in Mass Communications from the University of South Florida and has excelled in Mass Communication
Law as his elective studies. Mr. Giordano has been a consultant for over 20 years and has worked with various types of deal structures,
from helping structure the proposed sale and relocation of an NBA franchise to working with a structure on e-business companies
and the web integration field that included associations with executives of corporations such as Compaq, Digital Equipment Corp.,
Apple Computer, VisiCorp, Fortress Technologies and IBM. From 2006 through 2007, Mr. Giordano worked on a consulting basis for
SellaVision, Inc., a company involved with the infomercial and electronic retailing industry. From 2008 until present, has also
been instrumental in structuring and negotiating on behalf of the Company. Mr. Giordano has already been successful in creating
alliances that can be significant to the Company's future growth potential. Mr. Giordano will devote most of his time to this effort,
thus helping ensure the success of ACT. For the past two years all of Mr. Giordano's time and efforts have been solely concentrated
on the Company. From price point to structure as well as the marketing of the product to affiliate programs which are now ready
to be rolled out. These are all part of the vision along with Mr. Jackson in order to bring to market a product that is reliable,
affordable and one that can help thousands upon thousands of people in today's economy.
Chris Jackson.
Mr. Jackson is a
founder and has served as the President and Chief Operating Officer since inception. Mr. Jackson attended Texas Lutheran University
while seeking a degree in Marketing. He has been in sales management for the better part of 15 years. Mr. Jackson ran several automotive
dealerships sales departments and has a keen awareness of the credit markets importance. During the past four years, Mr. Jackson
has been involved with all aspects of the credit management software industry. From 2006 to 2007, Mr. Jackson worked for Mortgage
Credit Specialists and since that time, has overseen the construction and implementation of company's technology platform. His
personal hands on experience in the industry is key to the Company’s long-term success and growth strategies. Mr. Jackson’s
main focus will be the implementation of sales strategies for growing the Company’s revenues. Mr. Jackson devotes 100% of
his time to revenue generation and sales support within the Company.
Rex Schuette.
Mr. Schuette’s
vast experience and knowledge in the financial services sector will be instrumental in guiding the Company forward with its banking
relationships. Mr. Schuette was an Executive Vice President and Chief Financial Officer of United Community Banks, Inc. (“United”)
for the past 16 years until his recent retirement in May of 2017. United is one of the largest full-service banks in the Southeast
region of the United States, with over 168 offices and over $11 billion in assets. While at United, Mr. Schuette managed and directed
all accounting, financial and reporting activities for the bank, and was also responsible for mergers and acquisitions, investor
relations, strategic and capital planning. Prior to his time at United, Mr. Schuette spent sixteen years at State Street Corporation,
a global financial services company, where he served as the company’s Senior Vice President and Chief Accounting Officer.
Mr. Schuette has also served as the Chief Financial Officer of Bank One (Lead Bank), Deputy Comptroller of Harris Trust Savings
Bank, and Assistant Controller of the National Bank of Detroit. The knowledge and experience that Mr. Schuette brings to the Board
will be an important and strategic component of the Company’s continued growth in the banking industry, both domestically
and abroad.
(f) Involvement
in certain legal proceedings.
None.
(g)
Promoters
and control persons
.
None.
Section 16(A) Beneficial Ownership
Reporting Compliance
Section
16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our
equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and furnish
us with copies of all Section 16(a) forms they file. Based on our review of the EDGAR database, We believe that there are no persons
that are delinquent in filing the required forms for the year ended December 31, 2017.
Code of Ethics
We have adopted a Code of Ethics that
applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons
performing similar functions. Our Code of Ethics is designed to deter wrongdoing and promote: (i) honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii)
full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to,
the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules
and regulations; (iv) the prompt internal reporting of violations of our Code of Ethics to an appropriate person or
persons identified in the code; and (v) accountability for adherence to our Code of Ethics. We will provide any person
without charge a copy of our code of ethics upon receiving a written request which may be mailed to our office at 871 Venetia Bay
Boulevard, #202, Venice, Florida 34285.
ITEM 11. EXECUTIVE
COMPENSATION
Summary Compensation of Officers
The following table sets forth certain information
with respect to compensation paid to the Company's executive officers.
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-
Equity Instv. Plan Comp.
|
Change
in pension value & nonqualified deferred comp.earnings
|
All
Other Comp
|
Total
|
Christopher
Jackson
President,
Secretary, Treasurer & Director (PEO & PFO)
|
2017
|
$90,000
|
$23,678
|
$0.00
(1)
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$113,678
|
2016
|
$93,779
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$93,779
|
Mark
Carten
CTO &
Director
|
2017
|
$90,000
|
$4,985
|
$0.00
(1)
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$
99,985
|
2016
|
$54,671
|
$0.00
|
$100,000
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$154,671
|
Enrico
Giordano
VP &
Director
|
2017
|
$90,000
|
$16,510
|
$0.00
(1)
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$106,510
|
2016
|
$94,000
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$94,000
|
(1)
The employment contracts for Mark Carten, Enrico Giordano and Christopher Jackson all provide
that so long as they are in continuous service to the Company, on each annual anniversary date of their employment agreements
they shall be issued 100,000 shares of the Company’s common stock as an annual bonus. However, no such awards were issued
in 2017 as the first anniversary of the employment contracts will not occur until 2018.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information
with respect to outstanding equity awards for the Company's executive officers as of December 31, 2017.
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#) Un-exercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
There
are No Incentive-Based Stock Awards Outstanding
|
Mark Carten
Chief Technical Officer
|
-
|
-
|
5,000,000
(1)
|
*
|
#
|
-
|
Enrico Giordano
Vice President
|
-
|
-
|
5,000,000
(1)
|
*
|
#
|
-
|
Christopher Jackson
President, Secretary and Treasurer
|
-
|
-
|
5,000,000
(1)
|
*
|
#
|
-
|
* at
110% of the average of the closing bid price for the ten days preceding the Company’s achievement of each performance goal.
# All
of the options set forth in the above table are performance based and must be exercised within five(5) years of the date that they
vest with the executive.
(1) The
employment contracts for Mark Carten, Enrico Giordano and Christopher Jackson all include performance incentive stock options based
upon the Company meeting certain performance conditions that can potentially result in the issuance of stock option awards of up
to 5,000,000 shares each in the event that the Company reaches certain performance goals. Specifically, Mark Carten, Enrico Giordano
and Christopher Jackson each shall be entitled to receive ten (10) stock option awards of 500,000 shares of the Company’s
common stock each, upon the Company achieving certain milestones (the “ISO Awards”). The first ISO Award will vest
upon the Company achieving (cumulatively) $1,000,000 in Gross Revenues, and each additional ISO Award will vest upon the Company
achieving the next $1,000,000 increment in cumulative Gross Revenue up to a total of 5,000,000 shares each.
Compensation of Directors
The Company has not compensated any Board members
for their participation on the Board and does not have any standard or other arrangements for compensating them for such services. The
Company may issue shares of common stock or options to acquire shares of the Company’s common stock to members of the Board
in consideration for their services as members of the Board. The Company reimburses Directors for expenses incurred in connection
with their attendance at meetings of the Board.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Management
and Certain Beneficial Owners
The following table indicates the number
of shares of both our common and preferred stock that were beneficially owned as of December 31, 2017, by (1) each person known
by us to be the owner of more than 5% of our outstanding shares of preferred stock, (2) our directors, (3) our executive officers,
and (4) our directors and executive officers as a group. In general, "beneficial ownership" includes those shares a director
or executive officer has sole or shared power to vote or transfer (whether or not owned directly) and rights to acquire common
stock through the exercise of stock options or warrants exercisable currently or that become exercisable within 60 days. Except
as indicated otherwise, the persons named in the table below have sole voting and investment power with respect to all shares shown
as beneficially owned by them. We based our calculation of the percentage owned on 61,982,181 beneficially owned shares of common
stock outstanding as of December 31, 2017, and 30,000 beneficially owned shares of preferred stock outstanding on December 31,
2017. The address of each director and executive officer listed below is c/o Advanced Credit Technologies, Inc., 5871 Venetia Bay
Boulevard, #202, Venice, Florida 34285.
Title
of Class
|
Name
|
Number
of Common Shares Beneficially
Owned
|
Percentage
of Common
Class
|
Number
of Preferred Shares Beneficially
Owned
|
Percentage
of Preferred
Class
|
|
|
|
|
|
|
Directors
&
Officers
|
Mark
Carten
(1)(2)
|
5,000,000
|
8.0%
|
10,000
|
33.33%
|
Directors
&
Officers
|
Lynnwood
Farr
|
0
|
*
|
0
|
*
|
|
|
|
|
|
|
Directors
&
Officers
|
Enrico
Giordano
(2)
|
5,000,000
|
8.0%
|
10,000
|
33.33%
|
|
|
|
|
|
|
Directors
&
Officers
|
Christopher
Jackson
(2)
|
5,500,000
|
8.8%
|
10,000
|
33.33%
|
|
|
|
|
|
|
Directors
&
Officers
|
Rex
Schuette
(3)
|
2,525,000
|
4.0%
|
0
|
*
|
|
|
|
|
|
|
|
Officers & Directors
as a group (5 persons)
|
18,025,000
|
28.8%
|
30,000
|
100%
|
|
|
|
|
|
|
5% Shareholders
|
Peter Lacey
81 Burnwaite
Rd
London SW65BQ
United Kingdom
|
4,500,000
|
7.2%
|
0
|
*
|
* Represents less than 1%
The preferred shareholders vote together
with the common stock as a single class and the holders of the preferred stock are entitled to 5,000 votes per share.
(1)
Includes 4,000,000 shares of Common Stock held by Carten Tech LLC, of which Mark Carten has
voting and dispositive control.
(2) The
employment contracts for Mark Carten, Enrico Giordano and Christopher Jackson all include performance incentive stock options based
upon the Company meeting certain performance conditions that can potentially result in the issuance of stock option awards of up
to 5,000,000 shares each in the event that the Company reaches certain performance goals. Specifically, Mark Carten, Enrico Giordano
and Christopher Jackson each shall be entitled to receive ten (10) stock option awards of 500,000 shares of the Company’s
common stock each, upon the Company achieving certain milestones (the “ISO Awards”). The first ISO Award will vest
upon the Company achieving (cumulatively) $1,000,000 in Gross Revenues, and each additional ISO Award will vest upon the Company
achieving the next $1,000,000 increment in cumulative Gross Revenue up to a total of 5,000,000 shares each. The shares vest at
110% of the average closing bid price and must be exercised within five(5) years of the vesting date.
(3) Rex
Schuette also holds two warrants to potentially acquire a total of 1,250,000 additional shares of common stock. One warrant to
potentially acquire an additional 625,000 shares of common stock expires on June 19, 2018, and the other warrant to potentially
acquire an additional 625,000 shares of common stock expires on June 28, 2019.
Securities Authorized for Issuance
Under Executive Compensation Plans
As of December 31, 2017, the Company had
equity compensation plans with Mark Carten, Enrico Giordano and Christopher Jackson. A summary table of the potential share issuances
based upon these plans is set forth below:
Equity
Compensation Plan Information
|
Plan
Category
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights
|
Number
of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column
(a))
|
|
(a)
|
(b)
|
(c)
|
Equity
Compensation Plans Approved by Security Holders
|
15,000,000
|
*
|
1,000,000
|
Equity
Compensation Plans Not Approved by Security Holders
|
0
|
n/a
|
0
|
Total
|
15,000,000
|
*
|
1,000,000
|
* The
15,000,000 in options set forth in the above table are exercisable at 110% of the average of the closing bid price for the ten
days preceding the Company’s achievement of each performance goal and must be exercised within five(5) years of the vesting
date.
The employment contracts for Mark Carten,
Enrico Giordano and Christopher Jackson all include performance incentive stock options based upon the Company meeting certain
performance conditions. These performance incentive stock options were approved by the Company’s Shareholders. The Company
did not meet the requisite performance conditions in 2017, and it is unknown whether or not the Company will meet the requisite
performance conditions in 2018. The options are exercisable in 500,000 increments upon the Company initially achieving (cumulatively)
$1,000,000 in Gross Revenues, and each additional incentive stock option award will vest upon the Company achieving the next $1,000,000
increment in cumulative Gross Revenue.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
For the period ending December 31, 2017, there
was one transaction with a related person. On July 28, 2017, the Company acquired the CyberloQ™ banking fraud prevention
technology (the “Technology”) from CartenTech LLC along with all intellectual property rights associated with the Technology.
The owner of CartenTech LLC is Mark Carten, the inventor of the Technology. Mark Carten is also a director and the Chief Technology
Officer of Advanced Credit Technologies, Inc. As consideration for the acquisition of the Technology, CartenTech received: (a)
a payment of $50,000 at closing, (b) payment of $150,000 within 150 days after the closing (which due date was later extended to
330 days after the closing), and (c) 4,000,000 shares of the Company’s common stock.
Promoters and Certain Control Persons
The Company has not had a promoter at any time
during the last five fiscal years.
In addition, there are no parents of the Company.
Director Independence
The directors of the Company are also the executive
officers of the Company as well as direct and/or beneficial shareholders of the Company and therefore are not independent directors.
Members of the Company's management may become associated with other firms involved in a range of business activities. Consequently,
there are potential inherent conflicts of interest in their acting as officers and directors of the Company. Insofar as the officers
and directors are engaged in other business activities, management anticipates they will devote as much time to the Company's affairs
as is reasonably needed.
The officers and directors are, so long as
they are officers or directors of the Company, subject to the restriction that all opportunities contemplated by the Company's
plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that they are affiliated with on an equal basis. A breach
of this requirement will be a breach of the fiduciary duties of the officer or director. If the Company or the companies in which
the officers and directors are affiliated with both desire to take advantage of an opportunity, then said officers and directors
would abstain from negotiating and voting upon the opportunity. However, all directors may still individually take advantage of
opportunities if the Company should decline to do so.
In addition, on November 2, 2017, the Company
formally adopted a Related-Party Transactions Policy whereby the officers and directors of the Company are required to report to
the Board of Directors any activity that would cause or appear to cause a conflict of interest on his or her part. All related-party
transactions are subject to review, approval or ratification in accordance with the Related-Party Transactions Policy.
ITEM 14. PRINCIPAL ACCOUNTING FEES
AND SERVICES.
Effective May 19, 2017, the Company dismissed
Yichien Yeh, CPA (“Yeh”) as the Company’s independent registered public accounting firm. Contemporaneous with
the dismissal of Yeh, the Company engaged Fruci & Associates II, PLLC, 802 N. Washington, Spokane, Washington 99201, as its
independent registered public accounting firm for the fiscal year ended December 31, 2017.
The following table sets forth fees billed
to us for principal accountant fees and services during the years ended December 31, 2016 and December 31, 2017.
|
|
2016
|
2017
|
|
|
Audit Fees
|
$10,500.00
|
$13,796.00
|
|
|
Audit-Related Fees
|
$0.00
|
$0.00
|
|
|
Tax Fees
|
$0.00
|
$0.00
|
|
|
All Other Fees
|
$0.00
|
$0.00
|
|
|
Total:
|
$10,500.00
|
$13,796.00
|
|
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
and Nature of Business
ACRT (“ACRT”, ‘We”or
the “Company”) is a development-stage technology company focused on fraud prevention and credit management.
The Company offers a proprietary software platform
branded as CyberloQ™ . While previously the Company licensed CyberloQ, in the third quarter of 2017, the Company acquired
the CyberloQ technology and is now the exclusive owner of CyberloQ.
CyberloQ is a banking fraud prevention technology
that is offered to institutional clients in order to combat fraudulent transactions and unauthorized access to customer accounts.
Through the use of a customer’s smart-phone, CyberloQ uses a multi-factor authentication system to control access to a bank
card, transaction type or amount, website, database or digital service. The mobile applications for CyberloQ have been built, and
the Company is currently beta-testing the technology in the banking ecosystem.
In addition to CyberloQ, the Company offers
a web-based proprietary software platform under the brand name Turnscor® which allows customers to monitor and manage their
credit from the privacy of their own homes. Although individuals can sign-up for Turnscor on their own, the Company also intends
to market Turnscor to certain institutional clients, where appropriate, in conjunction with CyberloQ as a value-added benefit to
offer their customers.
Moreover, on March 30, 2017 the Company entered
into an Agreement with Swiss Venture Trust, a subsidiary of XCELL Security House, S.A. of Lausanne, Switzerland whose President,
Lynnwood Farr, is a member of the Company’s Board of Directors. The equity exchange and revenue sharing agreements entered
into between the two companies are currently in the process of being renegotiated, and the renegotiated terms of such contracts
will be disclosed when finalized.
On June 15, 2017, the Company created a private
limited company in the United Kingdom named CyberloQ Technologies LTD. CyberloQ Technologies LTD is a wholly-owned subsidiary of
the Company, and any business that the Company has in the United Kingdom will be transacted through CyberloQ Technologies LTD.
However, to date CyberloQ Technologies LTD has not generated any revenue for the Company.
Basis
of Presentation
The accompanying financial statements have
been prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) and the
rules of the Securities and Exchange Commission.
Principles of Consolidation – The consolidated
financial statements include the accounts of the Company and its wholly-owned or controlled operating subsidiaries. All intercompany
accounts and transactions have been eliminated.
Reclassification
Certain reclassifications
have been made to conform previously reported data to the current presentation. These reclassifications have no effect on our net
income (loss) or financial position as previously reported.
Use of Estimates
In preparing
these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities
in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these estimates. The Company
bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company
may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates
and the actual results, future results of operations will be affected.
Cash
and Cash Equivalents
Cash
equivalents are comprised of certain highly liquid investments with maturities of three months or less when purchased. The Company
maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced
any losses related to this concentration of risk. As of December 31, 2017 and December 31, 2016, the Company had $0 in deposits
in excess of federally-insured limits.
Research
and Development, Software Development Costs, and Internal Use Software Development Costs
Software development
costs are accounted for in accordance with ASC Topic No. 985. Software development costs are capitalized once technological feasibility
of a product is established and such costs are determined to be recoverable. For products where proven technology exists, this
may occur very early in the development cycle. Factors we consider in determining when technological feasibility has been established
include (i) whether a proven technology exists; (ii) the quality and experience levels of the individuals developing
the software; (iii) whether the software is similar to previously developed software which has used the same or similar technology;
and (iv) whether the software is being developed with a proven underlying engine. Technological feasibility is evaluated on
a product-by-product basis. Capitalized costs for those products that are canceled or abandoned are charged immediately to cost
of sales. The recoverability of capitalized software development costs is evaluated on the expected performance of the specific
products for which the costs relate.
Internal
use software development costs are accounted for in accordance with ASC Topic No. 350 which requires the capitalization of certain
external and internal computer software costs incurred during the application development stage. The application development stage
is characterized by software design and configuration activities, coding, testing and installation. Training costs and maintenance
are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result
in additional functionality.
In accounting
for website software development costs, we have adopted the provisions of ASC Topic No. 350. ASC Topic No. 350 provides that certain
planning and training costs incurred in the development of website software be expensed as incurred, while application development
stage costs are to be capitalized. During the twelve months ending December 31, 2017 and 2016, we expensed $76,673 and $147,225
in expenditures on research and development, respectively. Of the $76,673 paid in 2017, $54,000 was paid to Cartentech LLC,
an entity owned & controlled by the Company’s Chief Technology Officer.
Fixed Assets
The Company
records its fixed assets at historical cost. The Company expenses maintenance and repairs as incurred. Upon disposition of fixed
assets, the gross cost and accumulated depreciation are written off and the difference between the proceeds and the net book value
is recorded as a gain or loss on sale of assets. The Company depreciates its fixed assets over their respective estimated useful
lives ranging from three to five years.
Intangible
and Long-Lived Assets
The Company
follows FASB ASC 360-10,
"Property, Plant, and Equipment,"
which established a "primary asset"
approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting
for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived
asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition
of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
For the twelve months ending December 31, 2017 and 2016 the Company had not experienced impairment losses on its long-lived assets.
Revenue
Recognition
The Company
recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned
when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed and determinable, and collectability
is reasonably assured. Determining whether some or all of these criteria have been met involves assumptions and judgments that
can have a significant impact on the timing and amount of revenue the Company reports.
Fair Value
Measurements
For certain
financial instruments, including accounts receivable, accounts payable, accrued expenses, interest payable, advances payable and
notes payable, the carrying amounts approximate fair value due to their relatively short maturities.
The Company
has adopted FASB ASC 820-10,
"Fair Value Measurements and Disclosures."
FASB ASC 820-10 defines fair
value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements
for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities
each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between
the origination of such instruments and their expected realization and their current market rate of interest. The three levels
of valuation hierarchy are defined as follows:
·
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities
in active markets.
·
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities
in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially
the full term of the financial instrument.
·
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
The Company
did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair
value in accordance with FASB ASC 815.
In February
2007, the FASB issued FAS No. 159,
"The Fair Value Option for Financial Assets and Financial Liabilities,"
now
known as ASC Topic 825-10
"Financial Instruments."
ASC Topic 825-10 permits entities to choose to measure
many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. FASB ASC 825-10 is effective as of the beginning of an entity's first fiscal year that
begins after November 15, 2007. The Company has adopted FASB ASC 825-10. The Company chose not to elect the option to measure the
fair value of eligible financial assets and liabilities.
Segment
Reporting
FASB ASC 280,
"Segment
Reporting"
requires use of the "management approach" model for segment reporting. The management approach
model is based on the way a company's management organizes segments within the company for making operating decisions and assessing
performance. The Company determined it has one operating segment.
Income Taxes
Deferred income
taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all-of
the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in
tax laws and rates of the date of enactment.
When tax returns
are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while
others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent
likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits
in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities
upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income
taxes in the statements of operations. The Company is not aware of uncertain tax positions.
Earnings
(Loss) Per Share
Earnings per
share is calculated in accordance with the FASB ASC 260-10, "Earnings Per Share." Basic earnings (loss) per share is
based upon the weighted average number of common shares outstanding. Diluted earnings (loss) per share is based on the assumption
that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury
stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time
of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during
the period.
At December
31, 2017 and as of December 31, 2016 the Company has 1,250,000 warrants issued that can be exercised and could be dilutive to the
existing number of shares issued and outstanding. However, due to the Company’s periods of losses, the basic weighted average
is equal to the weighted average shares outstanding.
The computation
of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the financial
statements.
Stock Based
Compensation
The Company
adopted FASB ASC Topic 718 – Compensation – Stock Compensation (formerly SFAS 123R), which establishes the use
of the fair value-based method of accounting for stock-based compensation arrangements under which compensation cost is determined
using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which
the related services are rendered. For stock-based compensation the Company recognizes an expense in accordance with
FASB ASC Topic 718 and values the equity securities based on the fair value of the security on the date of grant. Stock
option awards are valued using the Black-Scholes option-pricing model.
The Company
accounts for stock issued to non-employees where the value of the stock compensation is based upon the measurement date as determined
at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn
the equity instruments is complete.
Recent Accounting
Pronouncements
In January
2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which revises
the accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of
certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements
associated with the fair value of financial instruments. The new guidance requires the fair value measurement of investments in
equity securities and other ownership interests in an entity, including investments in partnerships, unincorporated joint ventures
and limited liability companies (collectively, equity securities) that do not result in consolidation and are not accounted for
under the equity method. Entities will need to measure these investments and recognize changes in fair value in net income. Entities
will no longer be able to recognize unrealized holding gains and losses on equity securities they classify under current guidance
as available for sale in other comprehensive income (OCI). They also will no longer be able to use the cost method of accounting
for equity securities that do not have readily determinable fair values. Instead, for these types of equity investments that do
not otherwise qualify for the net asset value practical expedient, entities will be permitted to elect a practicability exception
and measure the investment at cost less impairment plus or minus observable price changes (in orderly transactions). The ASU also
establishes an incremental recognition and disclosure requirement related to the presentation of fair value changes of financial
liabilities for which the fair value option (FVO) has been elected. Under this guidance, an entity would be required to separately
present in OCI the portion of the total fair value change attributable to instrument-specific credit risk as opposed to reflecting
the entire amount in earnings. For derivative liabilities for which the FVO has been elected, however, any changes in fair value
attributable to instrument-specific credit risk would continue to be presented in net income, which is consistent with current
guidance. For the Company, this standard is effective beginning January 1, 2018 via a cumulative-effect adjustment to beginning
retained earnings, except for guidance relative to equity securities without readily determinable fair values which is applied
prospectively. The Company is currently assessing this ASU's impacts on the Company's consolidated results of operations and financial
condition.
In March 2016, the FASB issued ASU 2016-08,
“Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus
Net)”. The amendments in this ASU are intended to improve the operability and understandability of the implementation guidance
on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative
examples to assist in the application of the guidance. The effective date and transition of these amendments is the same as the
effective date and transition of ASU 2014-09, “Revenue from Contracts
with Customers (Topic 606)”. Public entities
should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting
periods therein. The Company is currently in the process of evaluating the impact of the adoption on its financial statements.
In March 2016, the FASB issued ASU 2016-09,
“Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The amendments
are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual
periods. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax
consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows.
In March 2016, the FASB issued ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting, which modifies certain accounting aspects for share-based payments to
employees including, among other elements, the accounting for income taxes and forfeitures, as well as classifications in the statement
of cash flows. With respect to income taxes, under current guidance, when a share-based payment award such as a stock option or
restricted stock unit (RSU) is granted to an employee, the fair value of the award is generally recognized over the vesting period.
However, the related deduction from taxes payable is based on the award’s intrinsic value at the time of exercise (for an
option) or on the fair value upon vesting of the award (for RSUs), which can be either greater (creating an excess tax benefit)
or less (creating a tax deficiency) than the compensation cost recognized in the financial statements. Excess tax benefits are
recognized in additional paid-in capital (APIC) within equity, and tax deficiencies are similarly recognized in APIC to the extent
there is a sufficient APIC amount (APIC pool) related to previously recognized excess tax benefits. Under the new guidance, all
excess tax benefits/deficiencies would be recognized as income tax benefit/expense in the statement of income. The new ASU’s
income tax aspects also impact the calculation of diluted earnings per share by excluding excess tax benefits/deficiencies from
the calculation of assumed proceeds available to repurchase shares under the treasury stock method. Relative to forfeitures, the
new standard allows an entity-wide accounting policy election either to continue to estimate the number of awards that will be
forfeited or to account for forfeitures as they occur. The new guidance also impacts classifications within the statement of cash
flows by no longer requiring inclusion of excess tax benefits as both a hypothetical cash outflow within cash flows from operating
activities and hypothetical cash inflow within cash flows from financing activities. Instead, excess tax benefits would be classified
in operating activities in the same manner as other cash flows related to income taxes. Additionally, the new ASU requires cash
payments to tax authorities when an employer uses a net-settlement feature to withhold shares to meet statutory tax withholding
provisions to be presented as financing activity (eliminating previous diversity in practice). For the Company, this standard is
required effective January 1, 2017.
In August 2016,
the FASB issued ASU No. 2016-15,
Classification of Certain Cash Receipts and Cash Payments,
which
is intended to reduce diversity in practice in how certain cash receipts and payments are presented and classified in the statement
of cash flows. The standard provides guidance in a number of situations including, among others, settlement of zero-coupon bonds,
contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions
received from equity method investees. The ASU also provides guidance for classifying cash receipts and payments that have aspects
of more than one class of cash flows. For the Company, this ASU is effective January 1, 2018, with early adoption permitted. The
standard requires application using a retrospective transition method. The Company is currently assessing this ASU’s impact
on its results of operations and financial condition.
In November 2016, the FASB issued ASU No. 2016-18,
Restricted Cash, which clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows.
Under the ASU, changes in restricted cash and restricted cash equivalents would be included along with those of cash and cash equivalents
in the statement of cash flows. As a result, entities would no longer present transfers between cash/equivalents and restricted
cash/equivalents in the statement of cash flows. In addition, a reconciliation between the balance sheet and the statement of cash
flows would be disclosed when the balance sheet includes more than one line item for cash/equivalents and restricted cash/equivalents.
For the Company, this ASU is effective January 1, 2018, with early adoption permitted. Entities are required to apply the standard’s
provisions on a retrospective basis. The Company does not expect this ASU to have a material impact on the Company’s consolidated
results of operations and financial condition.
NOTE
2 – GOING CONCERN
The Company
has incurred losses since Inception resulting in an accumulated deficit of $2,621,252 as of December 31, 2017 that includes a
loss of $559,990 for the year ended December 31, 2017. Further losses are anticipated in the development of its business. Accordingly,
there is substantial doubt about the entity’s ability to continue as a going concern within one year after the financial
statements are issued.
The accompanying
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could
result from the outcome of this uncertainty.
The ability
to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining
the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come
due.
Management
anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses.
The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of
management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially
viable and continue as a going concern.
NOTE 3 –
STOCKHOLDERS' DEFICIT
Common Stock
The Company
has 100,000,000 shares of $.001 par value common stock authorized as of December 31, 2017 and 2016.
In 2016, the
Company received $286,757 in payment for 6,565,059 shares of common stock. Also in 2016, the Company issued 1,210,000 shares of
common stock as compensation for services. Finally, the Company issued 337,375 shares of common stock in 2016 in exchange for the
conversion of debt.
There were
44,455,181 shares of common stock issues and outstanding as of December 31, 2016. In 2017, the Company received $700,850 in payment
for 12,677,000 shares of common stock. Also in 2017, the Company issued 4,000,000 shares of common stock to acquire the Cyberloq™
technology, and 350,000 shares of common stock were issued as compensation for services. Furthermore, the company issued 500,000
shares of common stock for the conversion of debt.
There were
61,982,181 shares of common stock issued and outstanding as of December 31, 2017.
Preferred
Stock
The Company did not
have any preferred stock prior to 2017. In April of 2017, the Company amended its articles of incorporation to create a new
class of stock designated Series A Super Voting Preferred Stock consisting of thirty-thousand (30,000) shares at par value of
$0.001 per share. Certain rights, preferences, privileges and restrictions were established for the Series A Preferred Stock
as follows: (a) the amount to be represented in stated capital at all times for each share of Series A Preferred Stock shall
be its par value of $0.001 per share; (b) except as otherwise required by law, holders of shares of Series A Preferred
Stock shall vote together with the common stock as a single class and the holders of Series A Preferred Stock shall be
entitled to five-thousand (5,000) votes per share of Series A Preferred Stock; and (c) in the event of any liquidation,
dissolution or winding-up of the Company, either voluntary or involuntary, the holders of the Series A Preferred Stock shall
be entitled to receive, prior and in preference to any distribution of assets of the Corporation to the holders of the common
stock, the original purchase price paid for the Series A Preferred Stock. All 30,000 shares of the Series A Super Voting
Preferred Stock were issued in 2017.
NOTE 4 – COMMITMENTS
The Company rents office space for
its main office at 871 Venetia Bay Blvd Suite #202 Venice, FL 34285. Monthly rent for this space is $50. All conditions have
been met and paid by the Company.
In 2015, in conjunction with a proposed
TurnScor Card platform, the Company signed three Investor Royalty and Warrant Agreements with four parties. In exchange for the
funds contributed by the four parties, the Company agreed to:
|
1.
|
Pay the investors monthly residuals of 2.0% to 5% per month on the gross revenue after expenses
generated by the Company's primary platform in conjunction with the Company's TurnScor Card;
|
|
2.
|
Pay the investors a residual in perpetuity on 2% to 5% of all sub-platform
revenue generated; and
|
|
3.
|
Issue warrants to investors all of which have either been exercised
or expired except for one individual that has two unexercised warrants: one to purchase 250,000 shares of common stock at $0.15
per share that expires in November of 2018, and another to purchase 250,000 shares of common stock at $0.20 per share that expires
in November of 2019.
|
The Company does not plan to proceed
with the TurnScor Card at this time.
NOTE 5 – RELATED PARTY TRANSACTIONS
Acquisition of Cyberloq™
During 2017 the Company acquired the
CyberloQ™ banking fraud prevention technology. (the “Technology”) Pursuant to the asset purchase agreement, the
prior license agreement between the Company and CartenTech LLC was terminated, and the Company is now the exclusive owner of the
CyberloQ™ banking fraud prevention technology along with all intellectual property rights associated with the Technology
which is copyrighted with the United States Copyright Office. The owner of CartenTech LLC is Mark Carten, who is also a director
of ACRT and its Chief Technology Officer. On July 28, 2017, the Company purchased the Technology with a value of $720,000. As consideration
for the acquisition of and all rights to the Technology, CartenTech LLC received: (a) payment of $50,000, (b) a note for $150,000,
and (c) 4,000,000 shares of the Company’s common stock. The software is being depreciated over its useful life of seven-years
in conjunciton with the Company’s amoritization policy.
Issuance of Warrants
In 2017, Rex Schuette, one of the Company’s
directors, was issued two warrants to potentially acquire a total of 1,250,000 additional shares of common stock. One warrant to
potentially acquire an additional 625,000 shares of common stock expires on June 19, 2018, and the other warrant to potentially
acquire an additional 625,000 shares of common stock expires on June 28, 2019. Both warrants are exerciseable at $0.20 per share,
and the Company valued the warrants at $51,192. the warrants will be expensed ratably through expiration.
Related Party Loans Payable
The following is a summary of related
party loans payable:
|
For the Year Ended December 31
|
|
2017
|
|
2016
|
Loans payable - stockholders
|
$
|
50,000
|
|
$
|
191,400
|
Loans from related parties
|
$
|
145,000
|
|
$
|
0
|
Loans Payable - Stockholders
On December 29, 2014, the Company entered
into a partially-convertible promissory note with a shareholder in the amount of $35,000. In January of 2015, the shareholer partially-exercised
its conversion option, and in May of 2016 the shareholder exercised the remainder of its conversion option. In December 2017, the
remaining unpaid principal and interest due on the note was settled in full for a $50,000 note and the Company recognized $151,324
in gain on settlement of debt.
In
December of 2015, the Company also issued stock options to the note holder to purchase 250,000 shares of the Company's common stock
at $0.25 per share one year from the issuance date of the promissory note. The stock option was not exercised and expired on December
31, 2016.
On October 26, 2013 the Company issued
a promissory note of $150,000. The total amount owed as of September 28, 2017 was $160,900. On September 28, 2017 the
total amount of $160,900 was converted to 500,000 shares of stock for a value of $150,000 and recorded other income gain of $10,900
by the Company.
Loans from Related Parties
As set forth
above, during 2017 the Company acquired the intellectual property and ownership rights to CyberloQ™ from Carten Tech, LLC.
The owner was the Company’s Chief Technology Officer, Mark Carten. The purchase included $50,000 in cash, note payable of
$150,000, and 4,000,000 shares of Common Stock.
NOTE 6 –
CONVERTIBLE NOTES-STOCKHOLDERS
On September
14, 2015, the Company issued a $10,000 convertible note due on March 12, 2016 to its stockholder. The note bears no interest and
is convertible to 125,000 shares at the rate of $0.08 per share per the terms of the note. There was a beneficial conversion feature
associated with the note. The value of beneficial conversion feature is $1,250 and book as additional paid in capital. The principal
and interest due pursuant to this note was converted into shares of the Company’s common stock on November 15, 2016.
On September
18, 2015, the Company issued a $8,990 convertible notes due on March 16, 2016 to its stockholder. The note bears no interest and
is convertible to 112,375 shares at the rate of $0.08 per share per the terms of the note. There was a beneficial conversion feature
associated with the note. The value of beneficial conversion feature is $2,248 and book as additional paid in capital. The principal
and interest due pursuant to this note was converted into shares of the Company’s common stock on November 15, 2016.
On October
14, 2015, the Company issued a $8,000 convertible notes due on April 11, 2016 to its stockholder. The note bears no interest and
is convertible to 80,000 shares at the rate of $0.1 per share per the terms of the note. The principal and interest due pursuant
to this note was converted into shares of the Company’s common stock on November 15, 2016.
On June 26,
2012 the Company issued a note to a shareholder for $12,000. Principal and interest were not originally recognized on this note
in 2012. On December 29, 2017 this note was converted to 150,000 shares of common stock and the Company recognized the transaction
as stock compensation expense upon such conversion.
NOTE 7
– INCOME TAXES
At December 31, 2017 the Company
had available federal and state net operating loss carry forwards to reduce future taxable income. The amount available
was approximately $2,621,252 federal and state purposes. The federal and state net operating loss carry forwards begin
to expire in 2028. Given the Company's history of net operating losses, management has determined that it is more likely
than not that the Company will not be able to realize the tax benefit of the net operating loss carry forwards. Accordingly,
the Company has recognized a valuation allowance that offests the deferred tax asset for this benefit.
FASB ASC Topic 740 – Income
Taxes (formerly SFAS 109) requires that the Company establish a valuation allowance when it is more likely than not that all or
a portion of deferred tax assets will not be realized. Due to restrictions imposed by Internal Revenue Code Section
382 regarding substantial changes in ownership of companies with net operating loss carry forwards, the utilization of the Company's
net operating loss carry- forward will likely be limited as a result of cumulative changes in stock ownership. The Company
has not recognized a deferred asset and, as a result, the change in stock ownership will not result in any change to the valuation
allowances. Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing
the tax benefit associated with the use of the carry forwards and will recognize a deferred tax asset at that time.
The provision for Federal income
tax consists of the following:
|
For the Year Ended December 31
|
|
2017
|
|
2016
|
Federal income tax benefit attributable to
:
|
|
|
|
Net operating loss
|
$
|
136,491
|
|
$
|
177,101
|
Less: valuation allowance
|
$
|
(136,491)
|
|
$
|
(177,101)
|
Provision for Federal tax benefit
|
$
|
-
|
|
$
|
-
|
The cumulative tax effect at the
expected rate of 23.3% of significant items comprising our net deferred tax amount is as follows:
|
For the Year Ended December 31
|
|
2017
|
|
2016
|
Deferred tax assets attributable to
:
|
|
|
|
Net operating loss carryover
|
$
|
837,351
|
|
$
|
700,860
|
Less: valuation allowance
|
$
|
(837,351)
|
|
$
|
(700,860)
|
Net deferred tax assets
|
$
|
-
|
|
$
|
-
|
The Company files income tax returns
in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by
tax authorities for three years following the filing of such returns. During the periods open to examination, the Company has net
operating loss and tax credit carry forwards for U.S. federal and state tax purposes that have attributes from closed periods.
Since these NOL's and tax credit carry forwards may be utilized in future periods, they remain subject to examination.
NOTE 8 –
SUBSEQUENT EVENTS
In January
of 2018, the Company issued 60,000 shares of common stock as settlement of an account payable.
In February of 2018,
the Company issued 500,000 shares of common stock in exchange for $50,000 pursuant to a private placement.
In December
of 2017, the Company agreed to issue 150,000 shares of common stock in full satisfaction of all principal and interest due pursuant
to a note. As of the date of this filing, the shares had not yet been issued.
Other than
the foregoing, the Company is not aware of any subsequent events through the date of this filing that require disclosure or recognition
in these financial statements.