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
|
|
68
|
|
CTO
& Director
|
|
April
2017
|
Enrico
Giordano
|
|
62
|
|
Vice
President & Director
|
|
Inception
|
Leon
Hurst
|
|
53
|
|
Director
|
|
February
2020
|
Christopher
Jackson
|
|
56
|
|
President,
Sec., Treas. & Director
|
|
Inception
|
Rex
Schuette
|
|
71
|
|
Director
|
|
September
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, 2020, 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.
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.
Leon
Hurst. Mr. Hurst owns and operates a tire distribution, installation and repair business. He also owns a towing and asset
recovery business. Mr. Hurst has been a Gideon member of the Lancaster northeast camp for over twenty years, serving as President,
Vice-President and Treasurer over that time. He is currently serving as the Treasurer of ROFM drug and alcohol treatment ministry
as well.
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 development 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 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 16 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, 2020.
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, #228, 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
Inctv. Plan Comp
|
|
|
Change in pension value & nonqualified deferred comp.earnings
|
|
|
All Other Comp
|
|
|
Total
|
|
Christopher Jackson
|
|
2020
|
|
$
|
90,000
|
|
|
$
|
-
|
|
|
$
|
8,500
|
(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
98,500
|
|
President, Secretary, Treasurer & Director (PEO & PFO)
|
|
2019
|
|
$
|
90,000
|
|
|
$
|
-
|
|
|
$
|
14,000
|
(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
104,000
|
|
Mark Carten
|
|
2020
|
|
$
|
90,000
|
|
|
$
|
-
|
|
|
$
|
8,500
|
(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
98,500
|
|
CTO & Director
|
|
2019
|
|
$
|
90,000
|
|
|
$
|
-
|
|
|
$
|
14,000
|
(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
104,000
|
|
Enrico Giordano
|
|
2019
|
|
$
|
90,000
|
|
|
$
|
-
|
|
|
$
|
8,500
|
(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
98,500
|
|
VP & Director
|
|
2019
|
|
$
|
90,000
|
|
|
$
|
-
|
|
|
$
|
14,000
|
(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
104,000
|
|
(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.
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, 2020.
|
|
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 the date
of filing, 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 76,494,515 beneficially owned shares of common stock outstanding as of the date of filing, and 30,000 beneficially owned
shares of preferred stock outstanding on the date of filing. The address of each director and executive officer listed below is
c/o CyberloQ Technologies, Inc., 5871 Venetia Bay Boulevard, #228, 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)
|
|
|
5,300,000
|
|
|
|
6.9
|
%
|
|
|
10,000
|
|
|
|
33.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors & Officers
|
|
Leon Hurst
|
|
|
2,648,363
|
|
|
|
3.5
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors & Officers
|
|
Enrico Giordano(2)
|
|
|
5,300,000
|
|
|
|
6.9
|
%
|
|
|
10,000
|
|
|
|
33.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors & Officers
|
|
Christopher Jackson(2)
|
|
|
5,800,000
|
|
|
|
7.6
|
%
|
|
|
10,000
|
|
|
|
33.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors & Officers
|
|
Rex Schuette
|
|
|
5,775,000
|
|
|
|
7.5
|
%
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers & Directors as a group (5 persons)
|
|
|
24,823,363
|
|
|
|
32.5
|
%
|
|
|
30,000
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% Shareholders
|
|
Peter Lacey 81 Burnwaite Rd London SW65BQ United Kingdom
|
|
|
4,500,000
|
|
|
|
5.9
|
%
|
|
|
0
|
|
|
|
0
|
%
|
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.
Securities
Authorized for Issuance Under Executive Compensation Plans
As
of December 31, 2020, 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
|
|
|
*
|
|
|
700,000
|
|
Equity Compensation Plans Not Approved by Security Holders
|
|
|
0
|
|
|
n/a
|
|
|
0
|
|
Total
|
|
|
15,000,000
|
|
|
*
|
|
|
700,000
|
|
*
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 2019 or 2020, and it is unknown
whether or not the Company will meet the requisite performance conditions in 2021. 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
On
October 29, 2019, the Company approved a loan of $30,000 from a director to the Company. The interest rate was 0% and the maturity
date was December 2, 2019. The Company paid this loan in full in February of 2020.
On
August 8, 2020, the Company approved a loan of $25,000 from a director to the Company. The interest rate is 12.5% and the maturity
date is August 1, 2021.
On
September 9, 2020, the Company approved a loan of $100,000 from a director to the Company. The interest rate is 12.5% and the
maturity date is August 1, 2021.
On
December 28, 2020, the Company approved a loan of $25,000 from a director to the Company. The interest rate is 12.5% and the maturity
date is October 1, 2021.
Further
Fred Andreini, a former director of the Company as of February 2021, is an owner of Magnum Health Management LLC, the parent company
of Diabetic Help Centers, LLC. On January 31, 2019, the Company entered into a software development to create an interactive database
incorporating a private blockchain and the Company’s CyberloQ® technology. The agreement stated that Diabetic Help Centers
will pay the Company $50,000 for the development of the database, along with monthly user fees once the database is being utilized
by Diabetic Help Centers to store patient records. The Company received $10,000 during the year ended December 31, 2020 and the
remaining $40,000 was written off as bad debt expense.
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, which also include the executive officers of the Company, 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.
|
The
following table sets forth fees billed to us for principal accountant fees and services during the years ended December 31, 2019
and December 31, 2020. All services provided by the Company’s independent registered accounting firm have been reviewed
and approved by the Company’s Board of Directors.
|
|
2019
|
|
|
2020
|
|
Audit Fees
|
|
$
|
23,250
|
|
|
$
|
19,500
|
|
Audit-Related Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
Tax Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
All Other Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
Total
|
|
$
|
23,250
|
|
|
$
|
19,500
|
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
and Nature of Business
CyberloQ
Technologies Inc. (“CLOQ”, ‘We” or the “Company”) is a development-stage technology company
focused on fraud prevention and credit management. The Company was originally incorporated as Advanced Credit Technologies, Inc.
in the State of Nevada on February 25, 2008. On November 20, 2019, the Company changed its name from Advanced Credit Technologies,
Inc. to CyberloQ Technologies, Inc.
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 have been successfully integrated into the banking ecosystem.
The
CyberloQ Vault is a “cloud based’ security protocol that allows clients the ability to send/receive secure data without
having to use traditional e-mail which is prone to a breach. This CyberloQ service uses cloud-based encryption and a secure web
portal to send/receive confidential data, the sender and receiver both must have authenticated their position within the prescribed
geo coordinates as well as authenticate their mobile devices prior to sending/receiving any data. Thus, rendering a hack or breach
utterly useless for the encrypted data is unusable without the CyberloQ authentication component.
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.
Basis
of Presentation
The
financial statements of the Company have been prepared using the accrual basis of accounting in accordance with generally accepted
accounting principles in the United States of America and the rules of the Securities and Exchange Commission. All amounts are
presented in U.S. dollars. The Company has adopted a December 31 fiscal year end.
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.
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. As of December 31, 2020, and
December 31, 2019, the Company had no 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 periods ended December 31, 2020 and 2019, we expensed $2,100 and $6,193,
respectively, for expenditures on research and development. None was paid to related parties.
Fixed
Assets, Intangibles and Long-Lived 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 fifteen years.
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.
As of December 31, 2020, the Company wrote-off the book value of the Cyberloq technology
software fixed asset and recorded software impairment expense of $321,725.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted the requirements of ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606
(ASU 2014-09 or ASC 606). The adoption of ASC 606 resulted in changes to the Company’s accounting policies for revenue
recognition previously recognized under ASC 605 (Legacy GAAP), as detailed below. However, since the Company had not earned any
revenue prior to adopting ASC 606, this policy change had no effect on any financial statements from prior periods, thus no adjustments
have been made to any prior periods related to the adoption of ASC 606.
Revenue
Recognition Policy
Under
ASC 606, the Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that
reflects the consideration the Company expects to receive in exchange for those products or services. To achieve the core principle
of ASC 606, the Company performs the following steps:
1)
Identify the contract(s) with a customer;
2)
Identify the performance obligations in the contract;
3)
Determine the transaction price;
4)
Allocate the transaction price to the performance obligations in the contract; and
5)
Recognize revenue when (or as) we satisfy a performance obligation.
The
Company derives its revenue from development, customization and user fees for the CyberloQ banking fraud technology products,
including CyberloQ Vault, and from licensing fees for the TurnScor product.
The
revenue derived from the CyberloQ banking fraud technology products are comprised of two components. First, there is a development
and customization fee paid to the Company to integrate CyberloQ with the banking institution or program manager’s ecosystem
in order to add the CyberloQ authentication to the bank’s payment cards, website or digital service. This fee is customarily
paid in multiple payments based upon the Company reaching certain milestones as set forth in the scope of work for each customer.
Since completion of a milestone is subject to each customer’s approval, there are significant judgments involved in the
determination of timing and satisfaction of performance obligations and the payments are recognized as revenue upon the completion
of each milestone. Second, revenue from user fees are accrued monthly based over the number of individual card users each month.
The
revenue derived from CyberloQ Vault is also comprised of two components. First, there is a development and customization fee paid
to the Company to build a customized cloud-based encryption and a secure web portal to send/receive confidential data. This fee
is customarily paid in multiple payments based upon the Company reaching certain milestones as set forth in the scope of work
for each customer. Since completion of a milestone is subject to each customer’s approval, there are significant judgments
involved in the determination of timing and satisfaction of performance obligations and the payments are recognized as revenue
over the completion of each milestone. Second, revenue from a monthly user fee is accrued monthly based upon the number of individual
users of the product each month.
License
fees generated by the nonexclusive licensing of the Company’s TurnScor product are accrued monthly.
As
of December 31, 2020, the Company had $0 in contract assets and contract liabilities. As of December 31, 2019, the Company has
$0 in contract assets, and a contract liability of $14,589 to perform on contracts. The contract liability reduced by $2,083 per
month as the Company provided a non-exclusive, non-transferable license to use the CyberloQ Vault Services for the customer’s
internal purposes.
|
|
Contract Asset
|
|
|
Contract Liability
|
|
December 31, 2019
|
|
$
|
-
|
|
|
$
|
14,589
|
|
Less: revenue earned and recognized
|
|
|
-
|
|
|
|
(14,589
|
)
|
December 31, 2020
|
|
$
|
-
|
|
|
$
|
-
|
|
Accounts
Receivable
The
Company extends credit to customers in the normal course of business. The allowance for doubtful accounts represents the Company’s
best estimate of the amount of the probable credit losses related to the Company’s existing accounts receivable. The Company
determines the allowance based on specific customer information, historical write-off experience and current industry and economic
data. Account balances are charged off against the allowance when the Company believes that it is probable that the receivable
will not be recovered. Management believes that there are no concentrations of credit risk for which an allowance has not been
established. Although management believes that the allowance is adequate, it is possible that the estimated amount of cash collections
with respect to accounts receivable could change. As of December 31, 2020, management deemed $40,000 uncollectible and this
amount was recorded as bad debt expense
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.
Advertising
Advertising
costs are expensed as incurred. Advertising expense for the year ended December 31, 2020 and 2019 was $6,787 and $10,351
respectively.
Income
Taxes
Deferred
income taxes are provided using the liability method (in accordance with ASC 740) 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, 2020 the Company has no warrants or options outstanding. At December 31, 2019 the Company had 250,000 warrants and
no options that could have been exercised and could have been 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 diluted 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 and warrant
awards are valued using the Black-Scholes option-pricing model, which according to ASC 820-10 is a level 3 value on the hierarchy.
Black Scholes assumptions were calculated using stock price at grant date between $0.29 to $0.149; exercise prices between $0.15
to $0.20: life expectancy between ½ year to 5 years; and volatility ranging from 163% to 68%.
Leases
FASB
issued ASU No. 2016-02, Leases (Topic 842), which establishes a comprehensive new lease accounting model. The new standard:
(a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications;
and, (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset
for leases. The standard became effective for calendar years beginning after December 15, 2018.
The
Company has made an accounting policy election not to recognize right of use assets and lease liabilities that arise from short
term leases for any class of asset.
In
June, 2020, the Company entered into a 12-month lease for office space at a rate of $426 per month, and paid a deposit of $500.
In September 2020, the Company moved to a different suite, the lease was amended to a rate of $639 per month, beginning on October
1, 2020. The Company paid an additional deposit of $200.
Recent
Accounting Pronouncements
None.
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.
NOTE
2 – FIXED ASSETS
Software
and computer equipment, recorded at cost, consisted of the following:
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Software and computer equipment
|
|
$
|
736,500
|
|
|
$
|
736,500
|
|
Less: Aaccumulated depreciation
|
|
|
(414,765
|
)
|
|
|
(292,090
|
)
|
Impairment expense
|
|
|
(321,735
|
)
|
|
|
-
|
|
Property and equipment, net
|
|
$
|
-
|
|
|
$
|
444,410
|
|
Depreciation
expense was $122,675 and $122,019 for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, the Company
wrote-off the book value of the Cyberloq technology software fixed asset and recorded software
impairment expense of $321,725.
NOTE
3 – GOING CONCERN
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
Company has incurred losses since Inception resulting in an accumulated deficit of $5,166,362 as of December 31, 2020 that
includes a loss of $983,271 for the year ended December 31, 2020. 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
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 debt and/or 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
4 – STOCKHOLDERS’ EQUITY
Common
Stock
The
Company has 100,000,000 shares of $.001 par value common stock authorized as of December 31, 2020 and December 31, 2019.
During
2020, the Company received $60,000 in payment for 923,076 shares of common stock that were recorded as “Shares to be issued”,
$66,666 in payment for 1,024,000 shares of common stock, $10,000 in payment for 160,000 shares and issued 80,000 shares
of common stock for services valued at $8,000.
Additionally,
the Company had an agreement to issue 3,333,333 common shares for $300,000, or $0.09 per share. The Company has collected $265,000
towards that agreement, and had previously disclosed the full amount and the related 3,333,333 common shares as “to be issued”.
In June 2020, the Company amended the stock subscription agreement and issued 2,650,000 shares in exchange for the $265,000 that
had previously been collected.
Also,
the Company issued 2,000,000 shares of common stock in settlement of a promissory note in
the amount of $40,000 to a related party, resulting in a loss on extinguishment of debt of $120,000. See Note 7.
At
December 31, 2020, the “shares to be issued” is comprised of 600,000 shares issuable to officers of the Company valued at
$70,140 and 923,076 shares issuable in the amount of $60,000.
During
2019, the Company received $200,000 in payment for 2,000,000 shares of common stock and issued 300,000 shares to officers in conjunction
with their 2018 service agreement, which were previously recorded as “Shares to be Issued” in the balance sheet. There
were 68,130,515 shares of common stock issued and outstanding as of December 31, 2019. Additionally, there were 300,000 shares
to officers for the current year portion of their service agreements, valued at $42,000.
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
5 – SBA EIDL Loan and Grant
On
June 9, 2020, the Company received an Economic Injury Disaster Loan from the Small Business Administration in the amount of $35,600.
The loan has a term of thirty years and an interest rate of 3.75% per annum. Payments in the amount of $174 monthly will begin
twelve months from the date of the note.
On
April 30, 2020 the Company received a grant from the Small Business Administration in the amount of $3,000.
NOTE
6 – COMMITMENTS
In
June 2020, the Company entered into a 12-month lease for office space at 871 Venetia Bay Blvd Suite #228Venice, FL 34285. The
monthly rent is $426 per month. The Company paid a deposit of $500 and the first month rent of $426 for July in June 2020. All
conditions have been met and paid by the Company. In September 2020, the lease was amended as the Company moved to Suite #228.
The amended monthly rent is $639 per month. The Company paid an additional deposit of $200 for the new suite.
In
2015, in conjunction with a proposed TurnScor Card platform, the Company signed Investor Royalty and Warrant Agreements with four
parties. In exchange for the funds contributed by the four parties, the Company agreed to:
|
●
|
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;
|
|
|
|
|
●
|
Pay
the investors a residual in perpetuity on 2% to 5% of all TurnScor Card sub-platform revenue generated; and
|
|
|
|
|
●
|
Issue
warrants to investors all of which have either been exercised or expired,
|
The
Company does not plan to proceed with the TurnScor Card at this time.
The
Company has commission agreements as follows:
|
●
|
An
agreement with a shareholder and director of the Company stating that the executive will be entitled to a two-and-a half-percent
(2.5%) commission of the gross revenue recorded by the Company for any customer contracts that are closed by the Company at
the time of and during the duration of the agreement. These commissions are payable quarterly upon receipt of customer revenues.
|
|
|
|
|
●
|
An
agreement with two sales managers granting each manager a 1% commission on the gross revenue of the Company. These commissions
are payable quarterly upon receipt of customer revenues.
|
NOTE
7 – RELATED PARTY TRANSACTIONS
Issuance
of Warrants/Options
All
outstanding warrants and options are fully vested and exercisable.
The
following is a summary of the warrants issued and outstanding in connection with common stock:
|
|
|
|
|
Weighted Avg Price
|
|
|
Weighted Avg Life
|
|
January 1, 2019
|
|
|
1,125,000
|
|
|
$
|
0.19
|
|
|
|
0.90
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(875,000
|
)
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
250,000
|
|
|
$
|
0.20
|
|
|
|
0.92
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
During
2016 and 2017, a director of the Company was issued two warrants to acquire a total of 1,250,000 shares of common stock. One warrant
to acquire 625,000 shares of common stock expired on June 19, 2018, and the other warrant to acquire 625,000 shares of common
stock expired on June 28, 2019. Both warrants were exercisable at $0.20 per share. During 2018, the Company revalued the warrants
based on information that caused a recalculation of the 1,250,000 warrants value from $51,592, as disclosed in the December 31,
2017 footnote, to the corrected amount of $96,643. This re-valuation had no material impact on 2017, given that the majority of
expense was recorded in 2018 and 2019. For 2020 and 2019, stock compensation expense for warrants was $0 and $18,570, respectively,
and all outstanding warrants have been fully expensed.
The
following is a summary of the options issued in connection with common stock:
|
|
|
|
|
Weighted Avg Price
|
|
|
Weighted Avg Life
|
|
January 1, 2019
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,200,000
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1,200,000
|
)
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
-
|
|
|
|
|
|
|
|
|
|
During
2018, the Company issued 1,200,000 non-qualified options to an independent contractor that were exercisable at $0.15 per share
and had a term of five years. During 2019, the Company entered into an Option Amendment Agreement with the independent contractor
reducing the term of the options that expired in November 2019. For 2020 and 2019 there was no stock compensation expense for
these options.
Related
Party Notes Payable
The
following is a summary of related party notes payable:
|
|
For the Years Ended
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Notes payable – stockholders
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
Notes - related parties
|
|
$
|
150,000
|
|
|
$
|
30,000
|
|
Notes
Payable - Stockholders
On
December 29, 2014, the Company entered into a partially-convertible promissory note with a stockholder in the amount of $35,000.
In January of 2015, the stockholder partially-exercised its conversion option, and in May of 2016 the stockholder 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. The $50,000 note has a current principal
balance of $35,000, a stated interest rate of 0%, required payments of $5,000 on or before June 10, 2019, $5,000 on or before
August 10, 2019 and the remainder due by the extended due date of September 15, 2019. As of December 31, 2020, the payments due
have not been extended and the Company plans to repay the notes in 2021.
Notes
Payable - Related Parties
On
November 7, 2019, the Company received a loan from a director in the amount of $30,000, with an interest rate of 0%. The loan
was repaid in February 2020.
On
March 24, 2020, the Company received a loan from a director in the amount of $40,000, with an interest rate of 0%. The maturity
date for the loan is June 30, 2020. On July 7, 2020, 2,000,000 shares of stock were issued to retire the loan resulting in a loss
on extinguishment of debt of $120,000.
On
August 8, 2020, the Company received a promissory note from a director in the amount of $25,000, with an interest rate of 0% and
a maturity date of September 10, 2020. On September 9, 2020, the promissory note was amended to revise the interest rate to 12.5%
and amend the final maturity date to August 1, 2021. Beginning March 1, 2021, the Company is required to make six equal monthly
principal payments plus accrued interest.
On
September 9, 2020, the Company received a promissory note from a director in the amount of $100,000, with an interest rate of
12.5%. The maturity date for the loan is August 1, 2021. Beginning March 1, 2021, the Company is required to make monthly payments
in the amount of $18,750, ending on August 1, 2021.
On
December 28, 2020, the Company received a promissory note from a director in the amount of $25,000, with an interest rate of 12.5%
and a maturity date of October 1, 2021.
NOTE
8 – INCOME TAXES
At
December 31, 2020, the Company had available federal net operating loss carry forwards to reduce future taxable income. The amount
available was approximately $4,398,883 for federal purposes. The federal net operating loss carry forwards begin to expire in
2029. 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 offsets 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,
|
|
|
|
2020
|
|
|
2019
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
$
|
206,487
|
|
|
$
|
98,558
|
|
Less: valuation allowance
|
|
$
|
(206,487
|
)
|
|
$
|
(98,558
|
)
|
Provision for Federal tax benefit
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Tax Cuts and Jobs Act of 2018 will reduce the dollar value of the net operating loss carry-forwards due to the corporate tax rate
decrease to 21%. However, the actual benefit will remain because, if allowed, the losses from prior years will offset taxable
income in future years regardless of the tax rate. The cumulative tax effect at the expected rate of 21% of significant items
comprising our net deferred tax amount is as follows:
|
|
For the Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred tax assets attributable to:
|
|
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
994,888
|
|
|
$
|
788,401
|
|
Less: valuation allowance
|
|
$
|
(994,888
|
)
|
|
$
|
(788,401
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is current on all income tax
filings. 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
9 – SUBSEQUENT EVENTS
On
Jan 11, 2021, the Company renegotiated an agreement with a prior director resulting in an increase in shares to be issued per
the agreement from 923,076, which were previously disclosed in “shares to be issued” to 1,600,000. The 1,600,000 shares
were issued on February 17, 2021. Additionally, on February 17, 2021 the Company issued 600,000 shares to officers that were previously
disclosed in “shares to be issued”. As a result of these issuance, the “shares to be issued” account is
zero.
On March 4, 2021
the Company issued 250,000 shares of common stock in exchange for an investment of $20,000.