10-Q 1 f10q0618_optileafinc.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended June 30, 2018

 

or

 

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 333-182856

 

OptiLeaf, Inc.

(Exact name of registrant as specified in its charter)

 

Florida   47-1553134

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

100 N Main St,

Wichita, KS, 67202

(Address of principal executive offices)(Zip Code)

 

(855) 678-4532

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

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). Yes ☒     No ☐

 

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.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)   Emerging growth company

 

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 Act). Yes ☐      No ☒

 

As of June 30, 2018, the registrant had 21,443,752 shares of its common stock outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
Item 1. Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Item 4. Controls and Procedures 11
     
PART II-- OTHER INFORMATION 13
     
Item 1. Legal Proceedings 13
Item 1A. Risk Factors 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Mine Safety Disclosures 13
Item 5. Other Information 13
Item 6. Exhibits 13
     
SIGNATURES 14

 

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OptiLeaf Incorporated

Balance Sheets

June 30, 2018 and December 31, 2018

(unaudited)

 

   June 30,
2018
   December 31,
2017
 
ASSETS        
Current Assets:        
Cash  $14,308   $17,197 
Accounts receivable   500    6,150 
Inventory   4,229    4,397 
Total current assets   19,037    27,744 
           
Computer equipment, net   -    - 
           
Other Assets          
Employee advance   2,255    2,255 
Security deposit   1,144    1,144 
Total other assets   3,399    3,399 
           
   $22,436   $31,143 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
Liabilities          
Accounts payable and accrued expenses  $5,405   $24,902 
Total current liabilities   5,405    24,902 
           
Long term loan-related parties   85,000    - 
Total Liabilities   90,405    24,902 
           
Commitments          
           
Stockholders’ Equity (Deficit):          
Common stock, no par value; 100,000,000 shares authorized, 21,433,752 shares issued and 20,433,752 outstanding at June 30, 2018 and December 31, 2107 respectively   746,000    746,000 
Treasury Stock, at cost, 1,000,000 shares at June 30, 2018 and December 31, 2107 respectively   (40,000)   (40,000)
Accumulated deficit   (773,969)   (699,759)
Total Stockholders’ Equity (Deficit)   (67,969)   6,241 
           
Total Liabilities and Stockholders’ Equity(Deficit)  $22,436   $31,143 

 

See accompanying notes to condensed unaudited financial statements.

 

 1 

 

 

OptiLeaf Incorporated

Statements of Operations

(unaudited)

 

   Three Months Ended   Six Months Ended 
   June 30,
2018
   June 30,
2017
   June 30,
2018
   June 30,
2017
 
Sales  $13,320   $900   $18,554   $900 
Cost of goods sold   5,494    -    5,494    - 
Gross income   7,826    900    13,060    900 
                     
Expenses:                    
Professional fees   4,471    14,518    8,721    18,387 
Payroll   20,692    29,581    53,179    68,923 
Rent   6,825    3,432    12,118    7,514 
Supplies   4,716    5,716    5,564    9,574 
Travel   381    1,596    712    3,228 
Other   2,492    4,621    9,153    9,912 
    39,577    59,464    89,447    117,538 
                     
Net loss before other income and provision for income taxes   (31,751)   (58,564)   (76,387)   (116,638)
                     
Other income                    
Other income   2,175    -    2,175    7,451 
Interest income   2    12    2    34 
Net loss before provision for income taxes   (29,575)   (58,552)   (74,210)   (109,153)
                     
Provision for income taxes   -    -    -    - 
                     
Net loss  $(29,575)  $(58,552)  $(74,210)  $(109,153)
                     
Basic and diluted loss per share  $(0.00)  $(0.00)  $(0.00)  $(0.01)
                     
Basic and diluted weighted average number of shares outstanding   21,443,752    19,210,419    21,443,752    19,210,419 

 

See accompanying notes to condensed unaudited financial statements.

 

 2 

 

 

OptiLeaf Incorporated

Statement of Cash Flows

(unaudited)

 

   Six Months Ended 
   June 30,
2018
   June 30,
2017
 
Cash flows from operating activities:        
Net loss  $(74,210)  $(109,153)
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation expense   -    1,752 
Decrease (increase) in:   -    - 
Account receivable   5,650    (6,950)
Security deposits   -    - 
Inventory   168    (7,332)
(Decrease) increase in:          
Accounts payable and accrued expenses   (19,497)   3,599 
Net cash used in operating activities   (87,889)   (118,084)
           
Cash flows from investing activities:          
Employee Advance   -    (2,000)
           
Net cash used in investing activities   -    (2,000)
           
Cash flows from financing activities:          
Settlement of stock subscription receivable          
Opening Balance Equity          
Proceeds from loan-related parties   85,000    - 
Treasury Stock Purchase          
Net cash provided by financing activities   85,000    - 
           
Net decrease in cash   (2,889)   (120,084)
Cash at beginning of period   17,197    194,778 
Cash at end of period  $14,308   $74,694 
           
Supplemental cash flow information:          
Cash paid during the period for:          
Interest  $-   $- 
Income taxes  $-   $- 

 

See accompanying notes to condensed unaudited financial statements.

 

 3 

 

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

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

 

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such principles and regulations of the Securities and Exchange Commission for Form 10-Q. All adjustments, consisting of normal recurring adjustments, have been made which, in the opinion of management, are necessary for a fair presentation of the results of interim periods. The results of operations for such interim periods are not necessarily indicative of the results that may be expected for a full year. The unaudited condensed financial statements contained herein should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2017

 

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2018 and December 31, 2017, the Company had no cash equivalents.

 

Use of Estimates

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

 

Property and Equipment

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

 

Maintenance and repairs are charged to operations when incurred. Betterments and improvements are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are reduced, and any gain or loss is included in operations.

 

Capitalized Software Development Costs

Software development costs are expensed as incurred until technological feasibility of the product is established. Development costs incurred subsequent to technological feasibility will be capitalized and amortized on a straight-line basis over the estimated economic life of the product. Capitalization of computer software costs will be discontinued when the computer software product is available to be sold, leased, or otherwise marketed. Amortization will begin when the product is available for release to customers. Management has determined as of June 30, 2018 that the software has not yet reached the stage of technical feasibility.

 

 4 

 

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue Recognition

Revenue is recognized as the Company satisfies it performance oblication over time in the amount of consideration which the Company expects it will be entitled in exchange for transferring promised goods or services to its customers. Revenue will be presented net of returns.

 

Revenue is recognized at the time the product is delivered or services are performed. Provision for sales returns will be estimated based on the Company’s historical return experience. Revenue will be presented net of returns.

 

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts which represents its best estimate of probable losses inherent in the accounts receivable balance. The Company evaluates specific accounts when it becomes aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its liquidity or financial viability, credit ratings, or bankruptcy. The Company periodically adjusts this allowance based upon its review and assessment of each category of receivables. As of June 30, 2018, the allowance for doubtful accounts was $0.

 

Research and Development

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

 

Net Loss Per Common Share

Basic net loss per common share is calculated using the weighted average common shares outstanding during each reporting period. Diluted net loss per common share adjusts the weighted average common shares for the potential dilution that could occur if common stock equivalents (convertible debt and preferred stock, warrants, stock options and restricted stock shares and units) were exercised or converted into common stock. There were no common stock equivalents at June 30, 2018 and 2017.

 

Income Taxes

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

 

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

 

The Federal and state income tax returns of the Company for 2017, 2016 and 2015 are subject to examination by the internal Revenue Service and state taxing authorities for three (3) years from the date filed.

 

Stock-Based Compensation

The Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value using an option pricing model. ASC 718 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from initial estimates.

 

Equity instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant disincentive for non-performance.

 

 5 

 

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair Value of Financial Instruments

Pursuant to ASC No. 820, “Fair Value Measurement and Disclosures”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of June 30, 2018 and December 31, 2017. The Company’s financial instruments consist of accounts payable and accrued expenses. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.

 

Recent Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize most lease liabilities on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The update states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The update is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The impact of this guidance will result in the recognition of assets and liabilities for leases that the Company enters into in the future.

 

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

 

Note 2. GOING CONCERN

 

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

 

The Company has experienced a loss from operations during its development stage as a result of its investment necessary to achieve its operating plan, which is long-range in nature. For the period from August 11, 2014 (inception) to June 30, 2018, the Company incurred a net loss of approximately $774,000. In addition, the Company has just started revenue generating operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

 

The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.

 

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

 

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

 

Note 3. COMPUTER EQUIPMENT (NET)

 

Equipment is recorded at cost and consisted of the following:

 

   June 30,   December 31, 
   2018   2017 
Computer equipment  $10,514   $10,514 
Less: accumulated depreciation   (10,514)   (10,514)
   $0   $0 

 

Depreciation expense was $0 and $1,752 for the month ended June 30, 2018 and 2017 respectively.

 

Note 4. LONG-TERM DEBT

 

The Company borrowed $30,000 from its CEO, $15,000 from its CFO, and $40,000 from its director as of June 30, 2018. The debt carries a 3% interest rate. The interest accrues and is payable at maturity in March and May of 2020. 

 

 6 

 

 

Note 5. STOCKHOLDERS’ EQUITY

 

Common stock

The Company has authorized shares of no par value common stock. At June 30, 2018, the number of shares of common stock issued was 21,433,752, and common stock outstanding was 20,433,752.

 

Treasury stock

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

 

Note 6. CONCENTRATION CREDIT RISK

 

The Company maintains its cash balances in a local financial institution which at times may exceed the $250,000 amount insured by the Federal Deposit Insurance Corporation (FDIC).

 

Note 7. COMMITMENTS AND CONTINGENCIES

 

The Company leases its offices in a month to month arrangement. The monthly minimum lease payments are $1,144 plus a pro rata share of operating expenses.

 

Note 8. INCOME TAXES

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences are as follows:

 

Income tax provision at the federal statutory rate   21%
Effect of operating losses   (21)%
    0%

 

At June 30, 2018, the Company has a net operating loss carryforward of approximately $774,000 for Federal and state purposes. This loss will be available to offset future taxable income. If not used, this carryforward will begin to expire in 2034. The deferred tax asset relating to the operating loss carryforward has been fully reserved at June 30, 2018 and December 31, 2017. The principal difference between the operating loss for income tax purposes and reporting purposes is disallowed meals and entertainment and a temporary difference in depreciation expense. 

 

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

 

 7 

 

 

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The information and financial data discussed below is derived from our unaudited financial statements, herein, for the period from inception, August 11, 2014 through June 30, 2018.  The unaudited financial statements were prepared and presented in accordance with generally accepted accounting principles in the United States. The information and financial data discussed below is only a summary and should be read in conjunction with the related notes contained elsewhere in this prospectus. The financial statements contained elsewhere in this prospectus fully represent our financial condition and operations; however, they are not indicative of our future performance.  

 

Overview

 

We were incorporated under the laws of the State of Florida on August 11, 2014. OptiLeaf, Inc. was formed to provide a world-class fully integrated turn-key growth management system for the cannabis industry to help dispensary owners, grow operations and caregivers increase their sales and reduce costs, increase their company’s productivity and profitability and reduce or eliminate the need for manual labor while maximizing yield. We are presently a development stage company with minimal customers, sales, suppliers, or inventory as of this filing.

 

OptiLeaf’s target market includes dispensaries and grow operations.

 

OptiLeaf has completed the development of its Grow Pro and POS management software. Both products are being beta tested in the state of Colorado and we are currently looking for beta testers in the states of Washington and Oregon. Optileaf has completed integration with Metric in the State of Colorado and Oregon and with BioTrack in the state of Washington.

 

Optileaf plans on commencing the development of its wireless network censors in the latter half of 2018. We believe our integrated hardware will be capable of monitoring and adjusting light, soil moisture, CO2, temperature, ventilation, nutrients, and humidity as needed, in real time and around-the-clock.

 

Our Product

 

Once developed, the heart of our system will be the innovative multi-purpose growth management software suite. OptiLeaf plans to add proprietary hardware components, which we believe, together with software, will provide a turn-key growth management system. The system, once developed and implemented, will potentially allow growers to realize significant labor savings as common grow house tasks are fully automated. Once developed, we believe our integrated hardware is capable of monitoring and adjusting light, soil moisture, CO2, temperature, ventilation, nutrients, and humidity as needed, in real time and around-the-clock. Once developed, we believe our user interface, data tracking, and remote access capabilities could potentially allow growers to monitor, adjust, and manage their facilities as needed from anywhere in the world, however, none of our products are fully developed or available for sale or use at this time, and there can be no assurance that our products will ever become fully developed, or will gain market acceptance when and if fully developed. 

 

In the period from inception (August 11, 2014) through June 30, 2018 we had approximately $45,000 of revenue and our net loss was approximately $774,000. As of June 30, 2018, we had total current assets of approximately $19,000 and total current liabilities of approximately $5,400. 

 

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Our Strategy

 

OptiLeaf will offer a complete line of hardware and software technological solution for the cannabis industry.

 

Our software is a seed-to-sale growth management system, designed to not only offer a complete grow automation system, but to enhance every aspect of the medical cannabis business.

 

Our wireless sensor networks will include an array of products that control, monitor, and automate all aspects of the grow house operations. Our principal product, OptiLeaf GrowPro Elite, provides a complete, robust state-of-the-art hardware and software solution for large cultivation operations with multiple locations.

 

The heart of our system will be a multi-purpose growth management software suite. OptiLeaf will add proprietary hardware components, which, together with software, will provide a turn-key growth management system. The system will potentially allow growers to realize significant labor savings as common grow house tasks are fully automated. Our integrated hardware is capable of monitoring and adjusting light, soil moisture, CO2, temperature, ventilation, nutrients, and humidity as needed, in real time and around-the-clock. Our user interface, data tracking, and remote access capabilities allow growers to monitor, adjust, and manage their facilities as needed from anywhere in the world.

 

Our products will be manufactured in the USA, managed by a team possessing years of experience with domestic and overseas production. OptiLeaf does not directly distribute, sell, grow, harvest cannabis or any substances that violate United States law or the Controlled Substances Act, nor does it intend to do so in the future.

 

While individual components of our system are available from our main competitors, OptiLeaf believes it will have the first and only system to completely integrate all aspects of growth automation and management into one system.

 

Marketing

 

OptiLeaf will focus its sales and marketing efforts in the states of Colorado, Oregon, Oklahoma, and Washington at this point. Once the rules and regulations for the state of California are introduced, we plan to expand our marketing efforts into that state as well. We have decided to focus our efforts with the most developed and broadest customer base at this point.

 

We are currently in the process of interviewing and hiring for full time marketing and sales personnel in Colorado, Oregon and Washington.

 

There are a total of 8,100 potential customers in the states of Colorado, Oregon, Oklahoma, and Washington.

 

Operations

 

OptiLeaf’s operational strategies behind the development of our products and services are based on design, innovation, and added value. When developing a new product, we want to be the leader by introducing innovative features that will allow cannabis cultivators to lower their costs, boost yields, and maximize production capacity. Furthermore, when OptiLeaf develops new goods or services, we will package them with support services as well as immediate observable and psychological benefits. Our focus is on how our products and services stand against the competition and how our technical measures relate to the customers’ needs.

 

 9 

 

 

Over the next twelve months, we anticipate expenses of up to $200,000 including general, administrative and corporate expenses.  The extent of such expenses will depend upon the successful implementation of our financing strategy and the acceleration of our business plan accordingly.

 

We expect to finance our operations primarily through our existing cash, our operations and any future financing.  If we do not obtain additional funding, we will continue to operate on a reduced budget until such time as more capital is raised. We believe that we could operate with our current cash on hand while satisfying any shortfall in cash flow with income that will be generated after the launch of our sales and marketing programs.  However, to effectively implement our business plan, we will need to obtain additional financing in the future.  

 

If we obtain financing, we would expect to accelerate our business plan and increase our advertising and marketing budget, hire additional staff members, and increase our office space and operations all of which we believe would result in the generation of revenue and profit for our company.

 

Results of Operations

  

We have conducted minimal operations during the period from inception (August 11, 2014) to June 30, 2018. We generated revenue of approximately $45,000 during this period.  We had net losses of approximately $774,000 for the period from inception (August 11, 2014) to June 30, 2018.

 

Liquidity and Capital Resources

 

As of June 30, 2018, we had cash of $14,308.  Our primary uses of cash were for employee compensation and working capital. The main sources of cash were from our Founders and Private Placement of securities. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:

 

  An increase in working capital requirements,
     
  Addition of administrative and sales personnel as the business grows,
     
  Increases in advertising, public relations and sales promotions as we commence operations,
     
  Research and Development,
     
  The cost of being a public company and the continued increase in costs due to governmental compliance activities.

 

The following summarizes the key components of the Company’s cash flows for the six months ended June 30, 2018 and 2017.

 

   2018   2017 
Cash flows used by operating activities  $(87,889)  $(118,084)
Cash flows used by investing activities   0    (2,000)
Cash flows -provided by financing activities   85,000    0 
Net decrease in cash and cash equivalents  $(2,889)  $(120,084)

 

We plan to fund our activities during and beyond 2018 through our existing cash on hand and through revenue generated through the sale of our product, and through additional debt or equity financing if available. We cannot be certain that such funding will be available on acceptable terms, or available at all. To the extent that we raise additional funds by issuing debt or equity securities or through bank financing, our stockholders may experience significant dilution. If we are unable to raise funds when required or on acceptable terms, we may have to significantly scale back, or discontinue, our operations.

 

 10 

 

 

Off-Balance Sheet Arrangements

 

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities. 

 

Critical Accounting Policies

 

Use of Estimates

 

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

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. At June 30, 2018, the Company had no cash equivalents.

 

Recently Issued Accounting Pronouncements

 

We do not expect that other recently issued accounting pronouncements will have a material impact on our financial statements.

 

Going Concern

 

Our financial statements have been prepared on a going concern basis. As of June 30, 2018, we have not generated significant revenues since inception. We expect to finance our operations primarily through our existing cash, our operations and any future financing.  However, there is no assurance we will be able to obtain such capital, through equity or debt financing, or any combination thereof, or on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted.

 

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

 

We are not required to provide the information required by this Item because we are a smaller reporting company.

 

Item 4.    Controls and Procedures

  

Evaluation of Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s President, Chief Financial Officer, Secretary, Treasurer and Director, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure for the reasons discussed below.

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

 

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Our management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2018. The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our President and Chief Financial Officer have determined and concluded that, as of June 30, 2018, the Company’s internal control over financial reporting were not effective.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control our financial reporting as of June 30, 2018, the Company determined that the following items constituted a material weakness:

 

  The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function;
     
  The Company’s accounting department, which consists of a limited number of personnel, does not provide adequate segregation of duties and timely information; and
     
  The Company does not have effective controls over period end financial disclosure and reporting processes.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. Management plans to take action and implementing improvements to our controls and procedures when our financial position permits.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the permanent exemption of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report (i.e. the first and second quarter of the fiscal year ended December 31, 2018) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II:  OTHER INFORMATION

 

Item 1.     Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

Item 1A.  Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds 

 

None.

 

Item 3.     Defaults Upon Senior Securities

 

None.

 

Item 4.     Mine Safety Disclosures

 

Not applicable.

 

Item 5.     Other Information

 

None.

 

Item 6. Exhibits, Financial Statement Schedules

 

Exhibit No.   Description
31.1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1   Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2   Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
101.INS   XBRL Instance Document *
101.SCH   XBRL Taxonomy Extension Schema Document *
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB   XBRL Taxonomy Extension Label Linkbase Document *
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document *

 

* Filed herewith

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 17, 2018

 

  Optileaf Inc
     
  By: /s/ Thomas Tran
    Name: Thomas Tran
    Position: Chief Executive Officer,
      Chief Technology Officer
      President
     
  By: /s/ Nick Nguyen
    Name: Nick Nguyen
    Position:  Chief Operating Officer,
      Chief Financial Officer
      Duly Authorized and
      Principal Financial Officer

 

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