Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Advanced Credit Technologies, Inc.
(Name of small business issuer in its charter)
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NEVADA
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7372
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26-2118480
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(State or other jurisdiction of organization)
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(Primary Standard Industrial Classification Code)
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(Tax Identification Number)
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1915 Plaza Drive
Suite 202
Eagan, Minnesota 55122
651-905-2932
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InCorp Services, Inc.
375 N Stephanie St., Suite 1411
Henderson, Nevada 89014-8909
702-866-2500
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(Address and telephone number of registrant's executive office)
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(Name, address and telephone number of agent for service)
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With copies to:
Wani Iris Manly, Esq.
W. Manly, P.A.
10 SW South River Drive, Suite 1712
Miami, Florida 33130
Telephone: (305) 408-9236
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. p
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. p
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. p
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. p
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large Accelerated Filer
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p
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Accelerated Filer
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p
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Non-accelerated Filer
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p
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Smaller reporting company
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x
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(Do not check if a smaller reporting company)
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CALCULATION OF REGISTRATION FEE
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Title of each class of
securities to be
registered
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Number of
shares to be
registered
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Proposed
maximum
offering
price per
share(1)
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Proposed
maximum
aggregate
offering price(2)
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Amount of
registration fee
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Common Stock for sale by selling stockholders
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2,891,000 |
$
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0.10
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$
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289,100 |
$
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103.06 | ||||
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(1)
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The proposed maximum offering price is based on the estimated high end of the range at which the common stock will initially be sold.
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(2)
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Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(e) under the Securities Act of 1933.
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this Prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement is filed with the Securities and Exchange Commission and becomes effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the sale is not permitted.
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Prospectus Subject to Completion dated ______________, 2010
ADVANCED CREDIT TECHNOLOGIES, INC.
2,891,000 Shares of Common Stock
This prospectus relates to the resale by certain selling security holders of Advanced Credit Technologies of up to ___2,891,000___________ shares of common stock held by security holders. We will not receive any of the proceeds from the sale of the shares by the selling stockholders.
The selling security holders will be offering our shares of common stock at a fixed price of $0.10 per share until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. Each of the selling stockholders may be deemed to be an “underwriter” as such term is defined in the Securities Act of 1933, as amended (the “Securities Act”).
There has been no market for our securities and a public market may never develop, or, if any market does develop, it may not be sustained. Our common stock is not traded on any exchange or on the over-the-counter market. After the effective date of the registration statement relating to this prospectus, we hope to have a market maker file an application with the Financial Industry Regulatory Authority for our common stock to be eligible for trading on the Over-the-Counter Bulletin Board. We do not yet have a market maker who has agreed to file such application. There can be no assurance that our common stock will ever be quoted on a stock exchange or a quotation service or that any market for our stock will develop.
OUR BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR SHARES OF COMMON STOCK WILL ALSO INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING “RISK FACTORS” BEGINNING ON PAGE 7 BEFORE INVESTING IN OUR SHARES OF COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. This prospectus is included in the registration statement that was filed by us with the Securities and Exchange Commission. The selling security holders may not sell these securities until the registration statement becomes effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
The date of this prospectus is October __, 2010.
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TABLE OF CONTENTS
| Industry Background | 15 |
| Our Services | 15 |
| The Market | 15 |
| Marketing Strategy | 16 |
| Competition | 17 |
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SUMMARY OF OUR OFFERING
Prospectus Summary
This summary highlights selected information about our company, Advanced Credit Technologies, Inc. This summary is intended to highlight information contained elsewhere in this prospectus. You should carefully read the entire prospectus, including the section entitled “Risk Factors.”
Our Business
Advanced Credit Technologies, Inc. (the “Company” or “ACT”) is a development stage company. The Company was organized under the laws of the state of Nevada on February 25, 2008. We formed our Company for the purpose of offering an easy-to-use technology platform that streamlines the credit management process. We also intend to offer additional e-books and Facebook applications for other financial products to compliment our system.
ACT is poised with “First to Market Advantage” to leverage the current market conditions as the defacto standard for credit management. With the rise in unemployment and debt, ACT is positioned to leverage the need for an automated credit management tool for the millions of Americans with sub par credit scores. There are very few instances where a client would not want to raise his/her credit scores, generally the only impediment to pursuing this course of action is the cost. Today’s cash strapped society has little extra discretionary income to hire a professional. By using our proprietary software system, clients can now perform affordable credit management with an automated process which makes it easy to understand and is results driven. Our system is changing the dynamic within the industry; we didn’t reinvent the wheel per say, we just simplified it.
We maintain a sophisticated back office component that can be accessed by anyone with minimal computer experience. Clients will see how simple the ACT software program is to use especially when compared to traditional routes of credit management. We believe this will establish a brand loyalty to any additional products we will offer in the future.
We intend to continue our focus on cutting-edge technology to stay ahead of the competition and on improving our user-friendly system and products along with price points which leaves room for our upsell of products. Contata Solutions, our technological partner, will provide the updates and additions to our Internet platform as required.
We intend to begin marketing our products in the U.S. under our retail portal “700creditmd.” which was designed to change the way individuals understand the credit management process.
In addition to that, we have our wholesale and Facebook applications to market our software.
Our principal executive offices are located at 1915 Plaza Drive, Suite 202, Eagan, MN 55122 and our telephone number is 651-905-2932.
Our Financial Situation
Since inception of our Company until present, we have enjoyed profitable operations. Our financial statements for the years ended December 31, 2008 and 2009 are prepared using the accrual basis of accounting under which revenues are recognized when earned and available as current assets and expenditures are generally recognized when the related liability is incurred for the goods or services received.
In order to become more profitable, we will need to generate increased revenues to offset our cost of sales and marketing, and general and administrative expenses.
Recent Developments
We are an operating company that has been implementing and improving our proprietary software system and credit management services. Our business plan was designed to create a viable, sustainable business. We have filed this registration statement in an effort to become a fully reporting company with the Securities and Exchange Commission in order to enhance our ability to raise additional capital. Our operations to date have been devoted primarily to developing and improving our proprietary software platform.
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Our software development team has created a unique back office that is integrated with three different front end delivery systems to take advantage of three very distinct marketing strategies.
1. Wholesale: This will be the first and foremost opportunity within the three segments. From Realtors, Auto Dealers, Loan Originators, to countless other business’s whose sales are dependent on a clients credit score to deliver their products. In short, these individuals and companies will purchase access (seat licenses) to our proprietary software and “GIVE” it away to their clients. Access will be given to clients through a secure server (web based) and will give them the opportunity to manage their own credit profiles, in turn, when something positive occurs the wholesale client is given a “notification” e-mail which prompts the wholesaler to contact the client and pursue the “sale”. What better way to build lasting relationships with past, present and future clients than helping them with their buying power. (credit score)
2. Facebook: This is in conjunction with the wholesale opportunity. Our technology partner has developed a unique Facebook application that allows business to market its products, services, or brand on Facebook - the most powerful social media tool to date. Currently there are 500,000,000 million users and it is growing everyday. The @mywork tool has integrated the credit management tool developed by ACT and we are joint marketing this one of a kind application. Imagine the possibilities of marketing your Real Estate or Auto’s on Facebook, plus having an integrated credit management tool to offer “complimentary” credit management to the masses. The tool itself has complete customization, SEO and tracking capability. Nothing has reached the market with these two powerful combinations. Many more applications and tools for social media such as Facebook etc, are currently under development as well to enhance our platform.
3. Retail: Our retail portal (“700creditmd”) was designed to change the way individuals understand the credit management process. The American public has been conditioned by the three major credit bureaus that they are virtually helpless when it comes to errors and blemishes within their credit profiles. Our website was designed to educate them on the inner workings of the credit bureaucracy. Simply put, the software allows them to manage their own credit profiles and correct errors and omissions which in turn will raise his/her credit scores all in the privacy of their home. This privacy factor alleviates the burden of having to use the traditional route of having to disclose a very personal financial matter and information to someone they don’t know. The system is simple, safe, secure, and accessible from any personal computer with web access. Because the client is managing his/her own credit profile, the cost is minimal compared to the traditional methods practiced within the industry. This is one of the strengths of using technology to assist regular everyday Americans who might not be able to afford to hire a professional or afraid to disclose their information to them.
The aforementioned reasons are why we created the personalized e-books, video tutorial library into our proprietary software services. The system allows individual users access to the system from the privacy of his/her home or office and to monitor their progress with their own personalized dashboard -- all the while, passing the personal savings directly to them. We understand that individuals learn with different formats, that’s why all of the tutorials are in text and video formats. All of the training and tutorials are accessible through our social media application as well.
By using our proprietary software system, clients can now perform affordable credit management with an automated process which makes it easy to understand and is results driven. Our system is changing the dynamic within the industry. We didn’t reinvent the wheel per say, we just simplified it.
Giving everyday Americans the tools necessary to manage their credit profiles is not a choice a lot of companies would make. By choosing this methodology we feel we will have a huge lead in the marketplace. Advanced Credit Technologies has reduced the workload from traditional methods by as much as 75%, with our Phase II build-out, that number could rise to as high as 90%. The software takes away much of the paperwork and human error and removes it from the process entirely.
In addition, we will offer affiliate programs to assist us in marketing our platform. From in-house custom graphics to co-branding the back office -- all in an effort to enhance monthly recurring revenue. In addition to these services, we will offer webbinars, SEO training, and website consulting that coincide with Facebook marketing. These training services alone can run from several hundreds to several thousand dollars. We will incorporate all this under the ACT umbrella for an access fee of only $30.00 per month , per individual. All these services combined would be very difficult to find under one roof as well as the many applications and upgrading we will constantly be implementing -- not to mention at this price.
Our proprietary system replaces the workload of several employees, reducing costs and offering a profit margin rarely seen in this competitive field. This is precisely why we believe the wholesale side of the industry will blossom because it is virtually untapped.
By focusing on the wholesale and social media segments, our Company is ready to capture a unique opportunity within the industry. Companies all across the country are looking for ways to keep clients in the purchasing mindset. Our product will produce an unparalleled pipeline of future sales. To do nothing only ensures failure. Companies are keenly aware that they need to tune into efficient ancillary revenue streams in order to succeed. By using our software system they will do just that. We are poised to capture ALL segments of the credit management and social media market.
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ACT is currently fully operational. In order to increase revenues, we must successfully address the following areas:
1. The Company must actively seek additional strategic relationships and alliances in the credit management industry.
2. Continually develop and implement a marketing and advertising plan: In order to promote our products and establish public awareness, we will be required to develop and implement a comprehensive marketing plan necessary to sell our products and services. We also intend to seek additional acquisitions which compliment our business plan. We intend to continuously generate awareness of our products and services through the implementation of multiple marketing platforms.
3. Create customer loyalty: It is critical that we maintain strong client relationships by marketing and advertising our services and then delivering on a consistent basis.
Our Offering
This prospectus relates to the sale of a total of __2,891,000_________ shares by the selling stockholders as set forth under the caption “Selling Stockholders”. The distribution of the shares by the Selling Stockholders is not subject to any underwriting agreement. We will receive none of the proceeds from the sale of the shares by the Selling Stockholders. We will bear all expenses of the registration incurred in connection with this offering, but all selling and other expenses incurred by the Selling Stockholders will be borne by the Selling Stockholders.
Summary of Selected Financial Information
The following table sets forth summary financial data derived from our financial statements. The data should be read in conjunction with the financial statements and the related notes thereto as well as the “Management’s Discussion and Plan of Operation” included elsewhere in this Prospectus.
Financial Data Summary
Balance Sheet Data
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ASSETS
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July 31,
2010
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Cash
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$ | 31,240.00 | ||
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Total Assets
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$ | 31,240.00 | ||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Accounts Payable
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$ | 8,717.00 | ||
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Total Current Liabilities
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$ | 8,717.00 | ||
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STOCKHOLDERS’ EQUITY
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$ | 534,792.00 | ||
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Additional paid-in-capital
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$ | 368,292.00 | ||
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Accumulated Deficit
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$ | -345,769.00 | ||
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Total stockholders’ equity
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$ | 22,523.00 | ||
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Total liabilities and stockholders’ equity
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$ | 31,240.00 | ||
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Statements of Operations Data
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Inception on
February 25, 2008 to
July 31, 2010
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Revenues
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$ | 80,700.00 | ||
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Operating Expenses
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$ | 425,175.00 | ||
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Earnings (Loss)
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$ | -344,475.00 | ||
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Weighted average number of shares of common stock outstanding
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17,102,000 | |||
RISK FACTORS
Investment in the securities offered hereby involves a high degree of risk and is suitable only for investors of substantial financial means who have no need for initial liquidity in their investments. Prospective investors should carefully consider the following risk factors:
RISKS RELATING TO OUR BUSINESS
We are seeking additional financing to expand our product development and operations, and if we are unable to obtain funding when needed, our business may not grow
We need additional capital to continue to grow our core competencies and to expand into new, industry related opportunities. We will be required to fund the growth of our existing operations through the sale of equity shares and will not be able to continue our current growth if we are unsuccessful in selling such shares. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common stock.
Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue to grow our existing business and operations.
If we are unable to establish and maintain relationships with our targeted client base, we would not be able to continue with operations
We intend to establish strong relationships with clients offering various products and services through a multifaceted marketing plan designed to assist our clients in reaching their respective credit management goals. There is intense competition for these relationships and we may not be able to attract and retain these relationships in light of competitors with larger budgets and pre-existing relationships. If we cannot successfully secure these relationships, our business would be adversely affected and any investment made into the Company could be lost in its entirety.
Our success is dependent on our officers and directors to properly manage the Company and their loss or unavailability could cause the business to fail
We are heavily dependent on the personal efforts and abilities of our Officers and Directors. They have been and continue to expect to be able to commit full time to the continuing development of ACT’s business plan. The loss or unavailability of their services would have a materially adverse effect on our business prospects and potential earning capacity. We do not currently carry any insurance to compensate for any such loss.
As a result of becoming a reporting company, our expenses will increase significantly
As a result of becoming a reporting company whose shares are registered pursuant to the Securities Act of 1933, as amended, our ongoing expenses are expected to increase significantly, including expenses in compensation to our officer, ongoing public company expenses, including increased legal, accounting expenses as a result of our status as a reporting company, and expenses incurred in complying with the internal control requirements of the Sarbanes-Oxley Act. These increased expenses may negatively impact our ability to become profitable.
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Changing and unpredictable market conditions may impact the demand for our business solutions
There can be no guarantee that current demand for our marketing and advertising platforms will continue. There are several other companies currently offering similar services and if these companies are successful in developing new marketing platforms, our marketing platforms may become obsolete and undesirable in the marketplace. In such a scenario, our current products and services may well no longer be salable to our prospective clients.
RISKS RELATED TO OUR COMMON STOCK
We are controlled by current officers, directors and principal stockholders
Our officers and directors and principal founding stockholders beneficially own approximately _61___% of the outstanding shares of our common stock. So long as our officers and directors and principal founding stockholders control a majority of our fully diluted equity, they will continue to have the ability to elect our directors and determine the outcome of votes by our stockholders on corporate matters, including mergers, sales of all or substantially all of our assets, charter amendments and other matters requiring stockholder approval. This controlling interest may have a negative impact on the market price of our common stock by discouraging third-party investors.
If you purchase shares in this offering, you will experience immediate and substantial dilution
The $0.10 per share offering price of the common stock being sold under this prospectus has been arbitrarily set. The price does not bear any relationship to our assets, book value, earnings or net worth and it is not an indication of actual value. Accordingly, if you purchase shares in this offering, you will experience immediate and substantial dilution. You may also suffer additional dilution in the future from the sale of additional shares of common stock or other securities.
There is currently no market for Advanced Credit Technologies, Inc. common stock, but if a market for our common stock does develop, our stock price may be volatile
There is currently no market for our common stock and there is no assurance that a market will develop. If a market develops, it is anticipated that the market price of our common stock will be subject to wide fluctuations in response to several factors including:
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The ability to continue the development of our technology and improving our user-friendly system and products;
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The ability to generate increased revenues from sales;
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The ability to generate brand recognition of the ACT products and services and acceptance by clients;
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Increased competition from competitors who offer competing products and services; and
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ACT’s financial condition and results of operations.
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While Advanced Credit Technologies, Inc. expects to apply for listing on the OTC bulletin board (OTCBB), we may not be approved, and even if approved, we may not be approved for trading on the OTCBB; therefore shareholders may not have a market to sell their shares, either in the near term or in the long term
We can provide no assurance to investors that our common stock will be traded on any exchange or electronic quotation service. While we expect to apply to the OTC Bulletin Board, we may not be approved to trade on the OTCBB, and we may not meet the requirements for listing on the OTCBB. If we do not meet the requirements of the OTCBB, our stock may then be traded on the “Pink Sheets,” and the market for resale of our shares would decrease dramatically, if not be eliminated.
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There are legal restrictions on the resale of the common shares offered, including penny stock regulations under the U.S. federal securities laws. These restrictions may adversely affect the ability of investors to resell their shares
We anticipate that our common stock will continue to be subject to the penny stock rules under the Securities Exchange Act of 1934, as amended. These rules regulate broker/dealer practices for transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00. The penny stock rules require broker/dealers to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations and the broker/dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers who may be willing to engage in the trading of our shares. These additional penny stock disclosure requirements are burdensome and may reduce all of the trading activity in the market for our common stock. As long as the common stock is subject to the penny stock rules, holders of our common stock may find it more difficult to sell their shares.
Future sales of the company’s common stock by the selling shareholders could cause our stock price to decline
We cannot predict the effect, if any, that market sales of shares of the Company’s common stock or the availability of shares for sale will have on the market price prevailing from time to time. Sales by the Selling Shareholders named herein of our common stock in the public market, or the perception that sales by the Selling Shareholders may occur, could cause the trading price of our stock to decrease or to be lower than it might be in the absence of those sales or perceptions.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements relating to revenue, revenue composition, demand and pricing trends, future expense levels, competition in our industry, trends in average selling prices and gross margins, product and infrastructure development, market demand and acceptance, the timing of and demand for products, customer relationships, employee relations, plans and predictions for acquired companies and assets, future acquisition plans, restructuring charges, the incurrence of debt, and the level of expected capital and research and development expenditures. Such forward-looking statements are based on the beliefs of, estimates made by, and information currently available to the Company’s management and are subject to certain risks, uncertainties and assumptions. Any other statements contained herein (including without limitation statements to the effect that the Company or management “estimates,” “expects,” “anticipates,” “plans,” “believes,” “projects,” “continues,” “may,” “could,” or “would” or statements concerning “potential” or “opportunity” or variations thereof or comparable terminology or the negative thereof) that are not statements of historical fact, reflect our current views with respect to future events and financial performance, and any other statements of a future or forward looking nature are forward looking statements. The actual results of the Company may vary materially from those expected or anticipated in these forward-looking statements. The realization of such forward-looking statements may be impacted by certain important unanticipated factors, including those discussed in “Risk Factors” and elsewhere in this prospectus.
Because of these and other factors that may affect our operating results, our past performance should not be considered as an indicator of future performance, and investors should not use historical results to anticipate results or trends in future periods. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers should carefully review the risk factors described in this and other documents that we file from time-to-time with the Securities and Exchange Commission, including subsequent Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares offered by the Selling Stockholders.
DETERMINATION OF OFFERING PRICE
The $0.10 per share offering price of the common stock being sold under this prospectus has been arbitrarily set. The price does not bear any relationship to our assets, book value, earnings or net worth and it is not an indication of actual value.
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DILUTION
Dilution represents the difference between the offering price of the shares of Common Stock and the net book value per share of common stock immediately after completion of the offering. “Net book value” is the amount that results from subtracting total liabilities from total assets. The following table below sets forth the dilution assuming the sale of 100% of the securities offered for sale in this offering by the Company:
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Pre-Offering
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Post Offering
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Offering price per share
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$ | .10 | $ | .10 | ||||
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Net Tangible book value
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$ | -.0219 | $ | .0203 | ||||
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Increase in net tangible book value (per share)
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Dilution to investors
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$ | .0016 | ||||||
SELLING SECURITY HOLDERS
The persons listed in the following table plan to offer the shares shown opposite their respective names by means of this prospectus. The owners of the shares to be sold by means of this prospectus are referred to as the “selling” shareholders”. Each Selling Stockholder purchased the securities registered hereunder in the ordinary course of business of the Company. Other than registration rights granted by the Company in connection with the issuance of such securities at the time of purchase of the securities to be resold, no Selling Stockholder had any agreement or understanding, directly or indirectly with any person to distribute the securities. The Selling Stockholders and any underwriters, broker-dealers or agents participating in the distribution of the shares of our common stock may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, and any profit from the sale of such shares by the Selling Stockholders and any compensation received by any underwriter, broker-dealer or agent may be deemed to be underwriting discounts under the Securities Act. The Selling Stockholders may agree to indemnify any underwriter, broker-dealer or agent that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act.
In completing sales, brokers or dealers engaged by the selling shareholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions or discounts from selling shareholders in amounts to be negotiated. As to any particular broker-dealer, this compensation might be in excess of customary commissions. Neither, we nor the selling stockholders can presently estimate the amount of such compensation.
The selling shareholders and any broker/dealers who act in connection with the sale of the shares will be deemed to be “underwriters” within the meaning of the Securities Acts of 1933, and any commissions received by them and any profit on any resale of the shares as a principal might be deemed to be underwriting discounts and commissions under the Securities Act.
If any selling shareholders enters into an agreement to sell his or her shares to a broker/dealer as principal and the broker/dealer is acting as an underwriter, we will file a post-effective amendment to the registration statement, of which this prospectus is a part, identifying the broker/dealer, providing required information concerning the plan of distribution, and otherwise revising the disclosures in this prospectus as needed. We will also file the agreement between the selling shareholder and the broker/dealer as an exhibit to the post-effective amendment to the registration statement.
We have advised the selling shareholders that they and any securities broker/dealers or others who will be deemed to be statutory underwriters will be subject to the prospectus delivery requirements under the Securities Act of 1933. We have advised each selling shareholder that in the event of a “distribution” of the shares owned by the selling shareholder, such selling shareholder, any “affiliated purchasers”, and any broker/dealer or other person who participates in the distribution may be subject to Rule 102 of Regulation M under the Securities Exchange Act of 1934 (“1934 Act”) until their participation in that distribution is complete. Rule 102 makes it unlawful for any person who is participating in a distribution to bid for or purchase stock of the same class, as is the subject of the distribution. A “distribution” is defined in Rule 102 as an offering of securities “that is distinguished from ordinary trading transaction by the magnitude of the offering and the presence of special selling efforts and selling methods”. We have advised the selling shareholders that Rule 101 of Regulation M under the 1934 Act prohibits any “stabilizing bid” or “stabilizing purchase” for purpose of pegging, fixing or stabilizing the price of the common stock in connection with this offering.
To our knowledge, there are currently no plans, arrangements or understandings between any Selling Stockholder and any underwriter, broker-dealer or agent regarding the sale of shares of our common stock by the Selling Stockholders. The Selling Stockholders will pay all fees, discounts and brokerage commissions in connection with any sales, including any fees to finders.
Any shares of common stock covered by this prospectus that qualify for sale under Rule 144 of the Securities Act may be sold under Rule 144 rather than under this prospectus. The shares of our common stock may be sold in some states only through registered or licensed brokers or dealers. In addition, in some states, the shares of our common stock may not be sold unless they have been registered or qualified for sale or the sale is entitled to an exemption from registration.
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Under applicable rules and regulations under Regulation M under the Exchange Act, any person engaged in the distribution of the common stock may not simultaneously engage in market making activities, subject to certain exceptions, with respect to the common stock for a specified period set forth in Regulation M prior to the commencement of such distribution and until its completion. In addition and with limiting the foregoing, the Selling Stockholders will be subject to the applicable provisions of the Securities Act and the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M, which provisions may limit the timing of purchases and sales of shares of the common stock by Selling Stockholders. The foregoing may affect the marketability of the common stock offered hereby. There can be no assurance that any Selling Stockholders will sell any or all of the common stock pursuant to this prospectus.
We will pay all expenses of preparing and reproducing this prospectus with respect to the offer and sale of the shares of common stock registered for sale under this prospectus, including expenses or compliance with state securities laws and filing fees with the SEC. We expect such expenses related to the issuance and distribution of the shares of common stock offered by us and the Selling Stockholders to be approximately $25,000.
The Company is registering for offer and sale by the holders thereof 2,891,000 of common stock held by such shareholders. All the Selling Shareholders’ Shares registered hereby will become tradeable on the effective date of the registration statement of which this prospectus is a part.
The following table sets forth ownership of the shares held by each person who is a selling shareholder.
|
Name
|
Shares
Beneficially
Owned
Prior To
Offering(1)
|
Percent
Beneficially
Owned Before
Offering
|
Shares
to be
Offered
|
Amount
Beneficially
Owned
After
Offering
|
Percent
Beneficially
Owned
After
Offering
|
||||||||||||
|
Roy Aafedt
|
450,000 | 225,000 | 225,000 | 1.30 | % | ||||||||||||
|
Richard Wagner
|
100,000 | 50,000 | 50,000 | * | |||||||||||||
|
Paul Staffile
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
J. Michael Cullen
|
100,000 | 50,000 | 50,000 | * | |||||||||||||
|
Todd Thomas
|
100,000 | 50,000 | 50,000 | * | |||||||||||||
|
Edward Roos
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Tabatha and Eric Melby
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Karl Benardchik
|
60,000 | 30,000 | 30,000 | * | |||||||||||||
|
Charles Gillette
|
100,000 | 50,000 | 50,000 | * | |||||||||||||
|
Craig Tevedahl
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Pablo Silva
|
12,500 | 6,250 | 6,250 | * | |||||||||||||
|
Darrell Vasvick
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Kim Winters
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Joyce Lehr
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Donald E. Smith
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Chad Wolf
|
25,000 | 12,500 | 12,500 | * | |||||||||||||
|
Jill Komblatt
|
100,000 | 50,000 | 50,000 | * | |||||||||||||
|
Lawrence Hauskins
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Mary McAlpin
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Paul and Beth Norcia
|
100,000 | 50,000 | 50,000 | * | |||||||||||||
|
Timothy E. Wolfe
|
50,000 | 25,000 | 25,000 | * | |||||||||||||
|
Trident Merchant Group, Inc.
|
40,000 | 20,000 | 20,000 | * | |||||||||||||
|
Mike Mathieu
|
20,000 | 10,000 | 10,000 | * | |||||||||||||
|
Ron Onopa
|
8,000 | 4,000 | 4,000 | * | |||||||||||||
|
Mike Rosenbaum
|
40,000 | 20,000 | 20,000 | * | |||||||||||||
|
Donna Merendino
|
20,000 | 10,000 | 10,000 | * | |||||||||||||
|
Joel Honegger
|
8,000 | 4,000 | 4,000 | * | |||||||||||||
|
Allan Carter
|
8,000 | 4,000 | 4,000 | * | |||||||||||||
|
Mercury Asset Partners, LLC
|
1,208,000 | 604,000 | 604,000 | 3.50 | % | ||||||||||||
|
Phoenix Holdings, LLC
|
820,000 | 410,000 | 410,000 | 2.00 | % | ||||||||||||
|
Gemini Funding Group, LLC
|
800,000 | 400,000 | 400,000 | 2.00 | % | ||||||||||||
|
Guy M. James
|
40,000 | 20,000 | 20,000 | * | |||||||||||||
|
Galileo Russell
|
40,000 | 20,000 | 20,000 | * | |||||||||||||
|
Stuart Briggs
|
40,000 | 20,000 | 20,000 | * | |||||||||||||
|
Elisa Giordano
|
120,000 | 60,000 | 60,000 | * | |||||||||||||
|
Marie and Donald McAndrew
|
40,000 | 20,000 | 20,000 | * | |||||||||||||
|
Bella Capital Holdings, LLC
|
200,000 | 100,000 | 100,000 | * | |||||||||||||
|
Robert Schneiderman
|
20,000 | 10,000 | 10,000 | * | |||||||||||||
|
Mary Beth Alloco
|
8,000 | 4,000 | 4,000 | * | |||||||||||||
|
Louise Befumo
|
12,000 | 6,000 | 6,000 | * | |||||||||||||
|
Teresa Apolei
|
40,000 | 20,000 | 20,000 | * | |||||||||||||
|
Birchwood Capital Advisors, LLC
|
200,000 | 100,000 | 100,000 | * | |||||||||||||
|
Richard P. Greene
|
240,000 | 120,000 | 120,000 | * | |||||||||||||
|
Chris Giordano
|
700000 | 0 | 700000 | * | |||||||||||||
|
Theresa Gruber
|
120,000 | 0 | 120,000 | * | |||||||||||||
|
Patrick Derosa
|
25,000 | 12,500 | 12,500 | * | |||||||||||||
|
Ruben Zak
|
62,500 | 31,250 | 31,250 | * | |||||||||||||
|
John Cancellie
|
12,500 | 6,250 | 6,250 | * | |||||||||||||
|
Dave O’Brien
|
12,500 | 6,250 | 6,250 | * | |||||||||||||
|
TOTAL
|
6,602,000 | 2,891,000 | 3,711,000 | ||||||||||||||
|
*
|
Less than one percent (1%).
|
||||||||||||||||
|
(1)
|
Assumes current issued and outstanding ______17,102,000________ shares of common shares
|
||||||||||||||||
-11-
Section 15(g) of the Exchange Act
Our shares are “penny stocks” covered by Section 15(g) of the Exchange Act, and Rules 15g-1 through 15g-6 and Rule 15g-9 promulgated thereunder. They impose additional sales practice requirements on broker/dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). While Section 15(g) and Rules 15g-1 through 15g-6 apply to brokers-dealers, they do not apply to us.
Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules.
Rule 15g-2 declares unlawful broker/dealer transactions in penny stocks unless the broker/dealer has first provided to the customer a standardized disclosure document.
Rule 15g-3 provides that it is unlawful for a broker/dealer to engage in a penny stock transaction unless the broker/dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.
Rule 15g-4 prohibits broker/dealers from completing penny stock transactions for a customer unless the broker/dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.
Rule 15g-5 requires that a broker/dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation.
Rule 15g-6 requires broker/dealers selling penny stocks to provide their customers with monthly account statements.
Rule 15g-9 requires broker/dealers to approved the transaction for the customer's account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination; notify the customer of his rights and remedies in cases of fraud in penny stock transactions; and, FINRA’s toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons. The application of the penny stock rules may affect your ability to resell your shares.
FINRA has adopted rules that require that in recommending an investment to a customer, a broker/dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker/dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing a stockholder's ability to resell shares of our common stock.
Again, the foregoing rules apply to broker/dealers. They do not apply to us in any manner whatsoever. Since our shares are covered by Section 15(g) of the Exchange Act, which imposes additional sales practice requirements on broker/dealers, many broker/dealers may not want to make a market in our shares or conduct any transactions in our shares. As such, your ability to dispose of your shares may be adversely affected.
DESCRIPTION OF SECURITIES
We have __17,102,000____________ shares of our common stock issued and outstanding as of October 15th __, 2010. There is currently no public market for our common stock and there can be no guarantee that any such market will ever develop.
Common Stock
The Company is authorized to issue up to 100,000,000 shares of common stock, par value $.001. Holders of our common stock are entitled to one vote for each share in the election of directors and on all matters submitted to a vote of stockholders. There is no cumulative voting in the election of directors.
The holders of the common stock are entitled to receive dividends, when and as declared, from time to time, by our board of directors, in its discretion, out of any assets of the Company legally available.
Upon the liquidation, dissolution or winding up of the Company, the remaining assets of the Company available for distribution to stockholders will be distributed among the holders of common stock, pro rata based on the number of shares of common stock held by each.
Holders of common stock generally have no preemptive, subscription, redemption or conversion rights. The outstanding shares of common stock are, when issued, fully paid and non-assessable.
-12-
Preemptive Rights
No holder of any shares of Advanced Credit Technologies, Inc. stock has preemptive or preferential rights to acquire or subscribe for any unissued shares of any class of stock or any unauthorized securities convertible into or carrying any right, option or warrant to subscribe for or acquire shares of any class of stock not disclosed herein.
Non-Cumulative Voting
Holders of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares voting for the election of directors can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of ACT’s directors.
Preferred Stock
The company has no preferred stock authorized at this time.
Dividend Policy
The payment by us of dividends, if any, in the future rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition, as well as other relevant factors. We have not paid any dividends since our inception and we do not intend to pay any cash dividends in the foreseeable future, but intend to retain all earnings, if any, for use in our business.
Transfer Agent
ClearTrust, LLC, 17961 Hunting Bow Circle, Suite 102, Lutz, Florida 33558, telephone 813-235-4490.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
The law office of W. Manly, P.A., of Miami, Florida, an independent legal counsel, has provided an opinion and consent on the validity of Advanced Credit Technologies, Inc.’ issuance of common stock and is presented as an exhibit to this filing.
The financial statements included in this Prospectus and in the Registration Statement have been audited by Stan J.H. Lee, CPA, P.A., of 2160 North Central Road, Suite 203, Fort Lee, NJ 07024 to the extent and for the period set forth in their report appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
DESCRIPTION OF BUSINESS
Background
Advanced Credit Technologies, Inc. (the “Company” or “ACT”) is a development stage company. The Company was organized under the laws of the state of Nevada on February 25, 2008. We formed our Company for the purpose of offering an easy-to-use technology platform that streamlines the credit management process. We also intend to offer additional e-books and Facebook applications for other financial products to compliment our system.
ACT is poised with “First to Market Advantage” to leverage the current market conditions as the defacto standard for credit management. With the rise in unemployment and debt, ACT is positioned to leverage the need for an automated credit management tool for the millions of Americans with sub par credit scores. While giving the separate platforms a distinct advantage compared to the competition. There are very few instances where a client would not want to raise his/her credit scores, generally the only impediment to pursuing this course of action is the cost. Today’s cash strapped society has little extra discretionary income to hire a professional. By using our proprietary software system, clients can now perform affordable credit management with an automated process which makes it easy to understand and is results driven. Our system is changing the dynamic within the industry; we didn’t reinvent the wheel per say, we just simplified it.
We maintain a sophisticated back office component that can be accessed by anyone with minimal computer experience. Clients will see how simple the ACT software program is to use especially when compared to traditional routes of credit management. We believe this will establish a brand loyalty to any additional products we will offer in the future.
-13-
We intend to continue our focus on cutting-edge technology to stay ahead of the competition and on improving our user-friendly system and products along with price points which leaves room for our upsell of products. Contata Solutions, our technological partner, will provide the updates and additions to our Internet platform as required.
We intend to begin marketing our products in the U.S. under our retail portal “700creditmd.” which was designed to change the way individuals understand the credit management process.
ACT has never declared bankruptcy, has never been in receivership, and has never been involved in any legal action or proceedings. Since becoming incorporated, ACT has not made any significant purchase or sale of assets, nor has it been involved in any mergers, acquisitions or consolidations. ACT is not a blank check registrant as that term is defined in Rule 419(a)(2) of Regulation C of the Securities Act of 1933, since it has a specific business plan or purpose.
Since our inception, we have been engaged in business activities, including researching the industry, developing our technology platform, performing due diligence regarding potential customers most suitable for our ACT services and identifying future business platforms.
Currently, ACT has two officers and directors who have assumed responsibility for all planning, development and operational duties. Other than the officers and directors, there are two employees at the present time. We do anticipate hiring employees when the need arises.
ACT currently has no intention to engage in a merger or acquisition with an unidentified company. We may pursue strategic acquisitions that compliment our current business model within the advertising industry which may allow us to expand our activities and capabilities.
ACT’s fiscal year end is December 31.
Business of Issuer
Our services are in the U.S. under the brand name Advanced Credit Technologies, Inc. Our services, while not technically difficult to provide, must be continually developed to provide our clients the most current platforms.
By using our proprietary software system, a client can perform affordable credit management with an automated process which is easier than it has been done for years by professionals in the industry. We did not re-invent the process, but we automated and simplified it.
The credit management process is not a difficult one; however, due to our automation we feel we will have a huge lead in the marketplace. ACT and 700CreditMD has engineered methods to reduce the workload for credit management by up to 75 % and, with phase II build out technology, could be reduced by as much as 90%. ACT and 700CreditMD now have a reliable system that takes the paperwork and much of the human error out of the process.
In addition, we are offering affiliate websites that will give affiliates a custom home page for them to use as a portal for their customers. This is an excellent profit center and gives us high retention for those affiliates.
Our technology will focus initially on two channels:
|
|
Retail. End users who would traditionally have to buy a kit or hire a credit management specialist to do this for them. The drawback to most self-help methods is that it usually doesn’t work, and in some cases makes the situation worse. Our software, along with video tutorials, makes it impossible for a client to fail. The process is the same for everyone, why would you pay hundreds or thousands if you could do it yourself for minimal expense.
|
|
|
Wholesale. Those who wish to offer as a complimentary service to existing and potential clients to close more sales in their particular business -- from real estate, automotive, loan originators, boat and RV facilities, to insurance professionals. All in an effort to build a client network of profitable sales.
|
We plan to initially focus on North America and as it grows, the technology will work in all first world countries that have credit driven economies, such as Latin America, Asia and the Pacific Rim, and similar markets. As it grows, it will look for additional leverage by taking on partnerships and expanding the services to meet the needs of our market.
-14-
The number of Americans with bad credit has risen sharply since 2007, with more than 45 million now affected by a negative credit history( scores below 599 ), according to a study by FICO ( July 2010 ). The increase reflects a spike in delinquencies on home loans and credit cards by middle-class Americans.
The credit management business consists of thousands of smaller firms, organizations and individual consultants for everyone of the few dozen well-known companies. There are currently thousands of companies in the U.S. offering credit management and debt elimination services. credit management participants range from major consultants to thousands of individuals.
The Better Business Bureau has received more than 3,500 complaints about debt-relief companies since the beginning of the recession.
Due to widespread abuses, the Federal Trade Commission recently approved a rule (July 29, 2010, taking effect in October 2010) which will make it very hard for companies to pitch their business by advertising dubious claims related to their success rates. Among others, it will prevent them from charging upfront fees. This will thin the ranks of the credit management business sector and will surely put out of business a great number of unprofessional companies.
We would like to emphasize here that ACT is not in the business of settling debts on behalf of clients, nor collects upfront fees as a partial payment for service rendered or to be rendered in the future. We merely sell a product that involves a process to challenge information on credit reports, which may be wrong. The client is the one using the software to assist themselves.
ACT and 700CreditMD offers a proprietary software platform which will allow customers to monitor and manage their credit from the privacy of their own homes. They can sign up from their home or office via the Internet and manage their credit. The technology is unique in the industry and offers a reminder service and prompts the customer through the entire process.
In addition, we are offering affiliate websites that will give affiliates a custom home page to use as a portal for their customers. Our system can replace the work of up to 25 employees, saving hundreds if not thousands of manpower hours.
Our web-based platform has been put through numerous tests by Contata, our software partner. Contata ran thousands of trials using real people as mock clients going through the whole process. These thorough and comprehensive tests resulted in our current glitch-free platform, which can operate with thousands of clients at the same time and it can be scaled to any dimension if required. Our services include the following:
|
|
The customer is provided with everything they need, that can be provided over the Internet, to manage their credit. This service is offered at a price that cannot be matched by anyone operating a traditional credit management firm because of the need for employees.
|
|
|
The ACT and 700CreditMD system creates your own personalized home page and organizes your credit profile which is updated in real time and is accessible 24/7. The three major credit bureaus are hoping you get distracted, dejected, or simply give up and settle for a sub-par credit score. This means that credit card companies, banks and mortgage lenders can charge you a higher rate of interest, costing you thousands of dollars in wealth building capabilities
|
|
|
The wholesale division (ACT) also offers the processing of credit management to other firms that wish to offer this service or for those that do offer this service. ACT will increase their profit and reduce overhead.
|
|
|
We also offer private label websites allowing customers to use their store front to offer our services.
|
|
|
In addition, we offer consulting services.
|
ACT and 700CreditMD will be focusing initially on the general consumer market and on any company that bases the majority of it's sales through their customers credit such as mortgage companies, real estate companies and auto and marine dealers.
We will also market heavily to large organizations who can offer ACT as a service to their members such as unions, non-profits, churches, etc. Part of our marketing will be to the general consumer as it is our largest market it is also the most difficult and expensive to reach.
Improving FICO scores by using our software will necessarily take some time, which will pass anyway. There are millions of individuals who currently have no credit buying power but who will once the economy improves. By buying our service now, they will save time, and as soon as their buying power is restored, they will be able to buy on credit.
-15-
We have compiled an ebook as well as video tutorials which explain the credit management process and also help to sell the online software component. This ebook will give the consumer added value to their purchase and give us an additional opportunity to upsell them for added services in the process.
Because exposure, response and overall efficiency of Internet media are easier to track than traditional off-line media – through the use of web analytics for instance – Internet credit management can offer a greater sense of accountability for clients. Marketers and their clients are becoming aware of the need to measure the collaborative effects of marketing (i.e., how the Internet affects in-store sales) rather than siloing each advertising medium. The effects of multi-channel marketing can be difficult to determine, but are an important part of ascertaining the value of media campaigns.
The retail market will be initially web based advertising such as Facebook, MSN ad campaigns and other banner advertising. As we go along, we plan to use traditional media such as radio interviews and advertising on radio and television as well. We feel the wholesale side of the market is where the majority of our success will be. Retail will ultimately come but the power of the recurring revenue we will achieve through the wholesale market is ultimately where our longevity in the marketplace will lie.
Networking through social media is the future. A product needs a media to spread the word. This can be achieved very efficiently using social media by communicating with an ever expanding number of potential clients, answering their questions, promoting new features, getting feedback, criticism and kudos as well as suggestions. Some of those hundreds of millions of individuals active in social media may become our best, unpaid marketing agents
ACT together with our technology partner, Contata, will be expanding revenue streams through social networking. We firmly believe that this is where the next technology revolution resides.
Television (Infomercial): We intend to invest a substantial amount of funds in professionally made infomercials in order to reach as many potential clients as possible. According to some studies, about 1/3 of the U.S. population watch infomercials.
Facebook: This segment has recently presented itself to us through Contata. We have developed an application which bundles the credit management tool along with an application for business branding on Facebook. This is the most unique opportunity within the platform. No one has been able to master the Facebook application yet, however, we believe we've got a niche because this is where the people are: 500 million and growing. Facebook is likely the most important free advertising media for our product and it is increasingly the way people learn more about a business or product by visiting the site.
Some Facebook Statistics: http://www.facebook.com/press/info.php?statistics
o More than 500 million users.
o 50% of active users log on to Facebook in any given day.
o Average user has 130 friends
o People spend over 700 billion minutes per month on Facebook.
There is a new Nielsen study (August 2nd, 2010) focused on the power of networking. Findings include that Americans spend one quarter of the time they are on the internet equivalent to six hours a month on social networking sites and blogs, a quantum leap from a year ago. Additionally, the report reveals that U.S. consumers spend 36% of their time online on networking and blogs.
YouTube: Our company intends to take full advantage of the increasing popularity of this site to advertise its product.
We start with a critical competitive edge: We've not been able to locate any firm having a fully automated software platform to handle a large scale client base on a monthly basis. There are currently no less than 8,550 companies in the U.S. offering credit management and debt elimination services. With our current pricing structure on the retail market at $88/and $5 on the wholesale side of the equation, our positioning on this point is very hard to match, but only if we maintain this focus in our strategy, marketing, business development, and fulfillment. By using technology to keep your clients on the right track you ensure the success they want and desire.
-16-
Our web based platform includes a number of video tutorials which will provide all the relevant information guiding the client in the procedure to achieve the expected results.
Additionally, Contata, Inc., our technological partner, has created Gofaceit -- a name through which to market @work, a powerful Facebook application which allows certain businesses and individuals to market their products and services on Facebook, as well as the credit management tool developed by ACT. It is an extremely easy application to install and use and is a perfect tool for realtors, lenders, insurance professionals, the automotive and recreational sales business, and anyone else who would benefit from marketing their product or service on their Facebook fan page and whose sales are dependent on their customers obtaining financing. It is our belief that these products marketed together are more powerful than either of them individually, and easier to market and sell together.
Initially, the product will be marketed on Facebook focusing on very specific targeted markets. Our company has the ability to market to certain firms, groups, cities and other demographic criteria. Because Facebook and followers respond differently to advertising than traditional Google, PPC and CPM, we intend to test a few different landing page concepts seeking opt-ins to attend webinars and training about our product Gofaceit and how it can be used to increase their sales revenue. With proper follow up, this should lead to anticipated conversion numbers of approximately 20%.
Search Engine Optimization and branding our product with blogging, video blogging and article submission will be used in conjunction with our Facebook advertising efforts driving people to either a contact up opt-in or weekly Facebook marketing list.
Direct selling will also be used to warm up markets and referrals to realtors, lenders and auto dealers.
All our Gofaceit customers will have access to training videos in our training library that will be used to educate them in the use of Mycmtools, Gofaceit, Facebook marketing tips and other technical marketing tools and tricks including the appropriate Google Apps. Many of these same videos will be re-syndicated for video blogging and our opt-in list to increase SEO and sales conversions
We plan to develop a department that not only supports Gofaceit and all the updates that will enhance this product like worbix and other ideas yet to be developed by our software partner Contata, but a full fledged group of web developers to help create business Facebook fan pages and other websites and pages so we can offer a complete turnkey web presence that benefits the business and its individual employees in their marketing efforts on Facebook and the web
Competition in the credit management industry is growing. Many of our competitors are larger and have greater financial resources than we do. Accordingly, we must rely on our innovative, proprietary software platform to gain market share in the industry.
Employees
Other than our officers and directors, there are two employees of the Company. Our officers and directors intend to do whatever work is necessary to increase revenues from operating. Human resource planning will be part of an ongoing process that will include constant evaluation of operations and revenue realization.
Board Committees
ACT has not yet implemented any board committees as of the date of this Prospectus.
Directors
There is no maximum number of directors ACT is authorized to have. However, in no event may ACT have less than one director. Although the Company anticipates appointing additional directors, it has not identified any such person(s).
-17-
DESCRIPTION OF PROPERTY
ACT’s corporate office is located at 1919 Plaza Drive, Suite 202, Eagan, Minnesota 55122 and our telephone number is 651-905-2932. This office space is leased by an officer of the Company.
ACT’s management does not currently have policies regarding the acquisition or sale of real estate assets primarily for possible capital gain or primarily for income. ACT does not presently hold any investments or interests in real estate, investments in real estate mortgages or securities of or interests in persons primarily engaged in real estate activities.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings. ACT’s officers and directors have not been convicted in any criminal proceedings nor has they been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.
The Company’s officers and directors have not been convicted of violating any federal or state securities or commodities law.
There are no known pending legal or administrative proceedings against the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This section must be read in conjunction with the Audited Financial Statements included in this prospectus.
Plan of Operation
We are an operational company, incorporated on February 25, 2008. We have generated revenues and expect to generate increased revenues in the foreseeable future. See “Description of Business” contained herein.
Our Officers and Directors are responsible for our managerial and organizational structure which will include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, they will be responsible for the administration of the controls. Should they not have sufficient experience, they may be incapable of creating and implementing the controls which may cause us to be subject to sanctions and fines by the Securities and Exchange Commission which ultimately could cause you to lose your investment.
Since incorporation, the Company has financed its operations through private investment. As of July 31, 2010, we had $__31,240____ cash on hand. We had total expenses of $___8717.00_____.
To date, the Company has successfully implemented its business plan and is attempting to secure additional funding to continue the expansion process into the credit management industry. The Company intends to continue developing its own internet properties including lead generation websites, social communities, and directory services targeting specific industries.
October 2010 Update: As of this writing our phase one software platform is complete and working without any issues. We have secured a bid from our software partner ( Contata Solutions ) and will be pursuing the build out of this in Q1 of 2011. The expenditure for this upgrade is $25,000 US dollars. Details of the software upgrade are available from the CEO.
Since our inception in February of 2008 we have had a very extensive “BETA” test on our core product ( automated credit management platform ) which was very successful. It allowed us to generate a small amount of revenue in 2009, but more importantly it validated our business model and propelled us to upgrade our technology for a massive growth opportunity. Now that our product is complete we are in the initial stages of sales and marketing our product to the general public.
Profit/Loss: ACT has yet to produce a profit in a given quarter, simply put, our development costs are complete, we now have a working product with minimal overhead. Short of monthly rent, servers, and misc. expenses the cost of our product to produce is ZERO. We do however understand that there will be constant upgrades to our technology platform to maintain its cutting edge capability. This is why we have already outlined a phase II upgrade as discussed in the previous paragraph. Our direct selling efforts have begun in earnest and we anticipate being profitable in Q1 of 2011.
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Marketing Directives: With the completion of the initial software platform our software partner Contata Solutions has engaged us in a joint marketing agreement for one of their products ( @mywork ) which is a Facebook Application. We've since co-branded the products and have created a unique hybrid that in our view will generate tremendous cash flow for ACT in the coming years. To understand the power of this product you simply need to know how many folks are on the social media ( FACEBOOK ) on any given moment in the course of a normal day. Millions of Americans spend hours upon hours per day, the fact that we've developed an application to target these people and their business activities with a unique branding tool is one of the reasons we have high expectations for our company. Our product allows a small business owner or entrepenuer to brand his/her company and tell “Stories” on Facebook, the customizable application has many powerful tools to assist the client in building his/her business. Having the ability to “Give Away” an automated credit management tool to assist clients simply seperates you from your competition and builds lasting relationships with your client base. No one wants to help people today if they have issues with their credit profiles. They simply get taken advantage of, we want to help them regain the American Dream. In addition to marketing our products therough the Facebook channel we will have direct sales, webinars, and e-commerce.
Trends: Our management team went through an exhaustive Risk Analysis Report to identify trends from all conceivable angles. That outline will be attached at the end of this MD&A. In some cases you may feel we went into too much detail, our thought was to provide potential investors with more critical analysis than less.
Funding: Once the company receives a cash infusion ( $1 million US Dollars ) with our current expense structure the company would be viable for no less than 24-36 months. More than enough time to get our internal and external sales underway to be profitable. Again, our software is already paid for ( small upgrade required $25k ) so in essense our funding is to be used for marketing support and a small portion for management salary. Our RAR has configured over 100,000 different scenarios for failure and the probability is very small. Simply put, management believes we have a unique opportunity to capture a huge segment of the market based upon common sense marketing strategies.
Management Compensation: Since the inception mangement ( CEO/Treasurer) have worked for equity, more important is that management realizes we must work from a minimal expense structure and will take small salaries until revenues warrant. Our goal is to build a successful company, not deplete the treasury for short term gain.
Liabilities: As of this writing the company has no long term liabilites, notes, or legal action against it. We do however have monthly rent, hosting for servers, and misc. expenses for day to day operations.
RISK ANALYSIS REPORT
Executive Summary
The objective of this analysis is to estimate EBIT-Earnings before interest and tax which we define as operating earnings by creating and running a simulation model which will consider assumptions and random events of various types. The purpose is to provide the entrepreneur and potential investors with a realistic forecast of earnings, thus enabling decision-makers the power of making informed decisions.
This risk analysis report includes the results of the model built as well as the assumptions chosen on which the model is based. This transparency will enable anyone reading the report the possibility of evaluating the robustness of the model and thus, its results.
After various discussions held with the entrepreneurs, we have selectively chosen assumptions and random events believed to be those having the greatest potential of affecting forecasts the most.
The data surveyed was provided by or agreed upon with the client and taken from various sources published on the internet. Where data was lacking, qualitative assessments through expert opinion is unavoidable but valuable nonetheless. All sources are listed throughout the report.
In general terms, in our opinion the results obtained indicate that the project has an above average probability of achieving an attractive level of operating earnings which translates into an above average return on investment.
Conclusions
After evaluating the results obtained by modeling the one year operating earnings forecast of Advanced Credit Technologies, our overall impression is that the project is feasible and attractive, from the ROI-Return on investment. We base our opinion on the operating earnings amount resulting at a 75% probability confidence level and a total investment of $1,000,000. This scenario depicts operating earnings amounting to an expected minimum of $259,451 (to ∞) attaining a 26%+ ROI on the original investment.
We carried out a stress test by means of including the “Armageddon Event” (see appendix 4) which essentially involves the combined impact of most of the risks events listed in the p-i table. Under a 75% probability (to ∞) confidence level, results show an operating loss amounting to ($40,478). On the other hand, there is 99%+ (AE excluded) and 73+% (AE included), probability that the project will break even in the first year of operation.
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A traditional deterministic analysis, of the type routinely being presented to potential investors would show in this particular case operating earnings of $442,691 and a 44+%+% ROI on the original investment (not on the total capital at the end of the year). The probability of reaching the latter figure within the framework of our analysis is about 30% (excl. AE) and 16%+ (incl. AE).
General
This model was built with the purpose of providing help to the entrepreneur as well as to potential investors, in making a decision based on the attractiveness of the project, from the point of view of its return on investment.
Assumptions and random events were selected toward the creation of a robust model. Uncertainty about the future means that we do not know for sure –for example- what the outcome of a particular forecast will be. Obviously, 20-20 hindsight makes all the difference, meaning that after the fact, we know then what the best solution would have been, had we had 100% certitude about the outcome before the event or assumption occurred. While this is not within the realm of what is possible, we can indeed add robustness to the model, by factoring in possible scenarios into our strategy and “risk” them, to provide for this ex ante, ex post conundrum.
We live in a dynamic world, where events of interest and otherwise occur non-stop, irrespective of what we do (or don‟t do). Our strategy to confront this, is to introduce changes in the model, to provide for this non spatial continuum situation in terms of events which succeed one another, from past to present to future. In short, as old events change values, these new values need to be factored in into the model in order to gain accuracy. Further, it is also possible that an interval in this non spatial continuum may present a scenario in which some events which were originally part of the model will lose all significance, while new ones are bound to play a role. This should also be confronted and dealt with by making appropriate modifications to the model.
How to read the results of the analysis
The results of the analysis depict the values obtained after running thousands of trials. The values represent the probability of an event occurring, under different confidence levels. This quantification of the probability of achieving a certain level of operating earnings will allow the entrepreneur and potential investors the possibility of evaluating the convenience of going ahead with the project and investing funds in it. This will depend on the yield objective of each individual and his or her risk tolerance. Thus, the perception of what a “mediocre”, “good” or “very good” project may be for the entrepreneur, a particular individual or among the various potential investors may differ considerably. One very important benefit of applying stochastic in lieu of deterministic processes is the fact that the former allow individuals with different needs and risk expectations the possibility of making informed decisions.
Introduction to the Problem
Mr Chris Jackson and Mr Enrico Giordano (“The Entrepreneurs”), the company principals, wish to launch a business venture related to the credit management sector. They have developed a unique automated platform to operate on the internet which allows individuals the possibility of challenging blemishes on their credit reports. Their intention is to approach the retail as well as the wholesale markets in the U.S. at the beginning and other countries later on. Details about their venture are provided in the corresponding business plan.
Project Impact Analysis
The venture –as any project- has vulnerable points which may affect the forecasted operating earnings. These vulnerabilities are due to unexpected variances in the various items of the P&L statement, as well as to random events of exogenous nature (risks and opportunities), which can also have an impact on the bottom line of the company. All these are included in the model built.
Forecast variations were determined taking into consideration the business model, the current and expected status of the economy. Also playing an important role are random events we included in the model which would also have an economic impact on earnings. We selected these possible events and its impact arbitrarily.
Supporting information
The information on which we have based our analysis is derived from various sources, essentially from various publications available on the internet and expert opinion (our own and that of the entrepreneurs).Sources have been cited and made available in each case, when statements or data is provided or factored into the model.
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Objective and Purpose of the Analysis
The objective of this risk analysis is to estimate the EBIT-Earnings before interest and tax of the company at end of the first year of operation, after considering the variance potential in sales volume, cost of goods sold and general & administrative expenses. Additionally, selected random events and its possible economic impact will also be introduced in the analysis and will also play a role in the final outcome.
Strategy
The entrepreneurs plan to raise $1 million to finance their project by approaching various sources. The entrepreneurs are aware of the importance of providing investors with a clear exit option enabling investors the possibility of cashing out. In view of this, the company is in the process of filing an S-1 form with the SEC to launch an IPO in the near future.
In order to estimate the probability of the project achieving an above average rate of return, we have selected three assumptions from the company‟s one year proforma P&L statement, plus ten random events which we believe could have positive and negative economic impacts on the company‟s bottom line. All this is detailed in the corresponding sections.
Scope
The analysis‟ horizon is one year from the date it was prepared but could be extended to 16 months by introducing timely modification with new information as it becomes available, that is, it would be valid roughly until the end of 2011. This means that all the assumptions, random events and variance built in some of the items in the P&L pro forma statement of the company, are expected to play a role (if occurring) through 2011.We are working under the premise that the company will launch its project at the beginning of the second half of 2010.
Challenges
We worked closely with the entrepreneurs to determine the variability of some of the proforma P&L statement items, as well as in the selection of the random events capable of causing an impact on the operating profit of the company.
One important challenge was to select those possible random events which had the potential of most likely affecting the particular project of interest, either due to economic, social or military occurrences. Furthermore, we have correlated some of those events which we believe have a direct incidence on others, by increasing its certitude of occurring.
Selection of Assumptions – Income, Cost and Expenses
These are assumptions related to the first year proforma profit & loss statement of the company, assessing the likelihood of achieving the expected EBIT-Earnings before interest and tax, as per the company‟s business plan estimate. The three P&L items modeled involve variances from the ML-Most Likely occurrence, depicted as Min-Minimum, and Max-Maximum. For example, first year sales of $1,800,000 (ML) may vary between $1,620,000 (Min) to $1.980,000 (Max). We need to emphasize that, while we are using a Minimum, Most Likely and Maximum scenario format, this should not be confused with the traditional deterministic excel, three single point scenarios. In our analysis we will plug these values in the model, creating 100,000 possible scenarios of each item modeled. Furthermore, we will estimate the certitude of occurrence at various confidence levels. Compare this to the mere Excel three point scenarios, which traditionally refer to sales only, and on top of that, gives the same probability of occurring to the three of them.
Sales Volume. This estimate is based on what the entrepreneurs think their company will sell during the first year. As per prior discussions with the entrepreneurs, they will devote a substantial amount of money in a promotional and advertising campaign. This is considered to be a vital point in their early growth strategy.
Cost of Sales. The cost of sales (aka cost of goods sold) was determined, together with the entrepreneurs. Components of cost of goods sold were arbitrarily determined due to the nature of the company, which essentially operates a web based automated platform on the internet.
Administrative and Marketing Expenses. These costs were determined with a reasonable level of accuracy, for the same reason as mentioned above, namely, the nature of the company which allows for a more or less clear identification.
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Selection of Assumptions – Random Events
In this section we will justify the reason why these particular assumptions or random event were selected. It is expected that if occurring they would affect the outcome of the original business plan forecasts. We have considered random events of economic as well as of political nature. While both create uncertainty among people, significant events of political origin may intensify uncertainty even more.
We do believe that consumer demand for the company‟s product will continue to prosper under almost any economic environment regardless, of its origin. However, we also consider that high levels of uncertainty may lead to a drop in spending, thus indirectly affecting company sales.
In other words, in the face of high levels of general political instability, business may diminish investing and people may slow down on their assets acquisitions, especially on credit1.
The probability of occurrence of these events has been arbitrarily quantified. The corresponding possible economic impact on sales was restricted to most likely values under 10% of estimated sales; events causing a higher impact surpassing the 10% threshold would be of a rather exceptional nature. It must be emphasized that sales has also been modeled as a distribution, not as a single point value. Our information was obtained from various sources available on the internet, including those from data mining companies.
Product launched by the competition (Risk).
After doing extensive research, the entrepreneurs have informed us that they could not find any company with a product similar to their offering. They have also filed a patent application to protect their business method. While this describes the current situation and the measures taken to prevent the competition from emulating their offering, the entrepreneurs are aware of the fact that the possibility of a competing product cannot be ruled out. There may be various reasons for it, such as the U.S. Patent and Trademark Office deciding against the granting of a patent, thus paving the way for competing products to appear in the market. In such an event, and even taking into account their head start advantage, the entrepreneurs consider that the competition could however carve up about 20% of the market for themselves during 2011. However, due to the great size of the market this possible event would not occur fully at the expense of the company‟s sales.
U.S. GDP growth 3% for all of 2011 (Opportunity).
Barring some unexpected event such as a double dip recession, we estimate that the U.S. GDP growth in 2011 will exceed 3% which as of August 2010 is a higher rate than that forecasted by some institutions (Goldman Sachs and others). We base our forecast on the lavish, unrelenting and unsparing spending which the current administration cum Federal Reserve backing and cheering is all too eager to shower the economy with at the first sign of faltering. In view of all this, we are comfortable with our 3%+ GDP growth rate forecast.
Laws detrimental to the company enacted by the Fair Credit Reporting Act (Risk).
The FCRA occasionally issues new rules affecting credit management firms such as a very recent one taking effect in September and October 20102 which does not address the company‟s business model. However possible, it is not likely that the FCRA will issue any ruling detrimental to the specific business procedure offered by the company. However, if it does, it would affect sales, depending on the restrictions imposed.
One or more European countries default on their sovereign debt (Risk).
The main impact that such an occurrence would cause (apart of the local social aspects) would be on the European banking system. Due to the existing world interlocking fragility, this will cause a ripple effect on the world financial system, and could have an effect on the company‟s sales.
The recent bank stress test carried out on European banks has been referred to as a charade and as an outright fraud. We subscribe to that point of view. It is increasingly seen as an outright self serving engineered stress test result orchestrated by the Committee of European Banking Supervisors to appease the public. There were 91 banks in 20 countries analyzed and all except seven passed the test. The seven which did not were selected as sacrificial lambs, included a bank in Greece, five relatively minor Spanish banks, as well as the much larger state-owned German property and municipal funding specialist, Hypo Real Estate. The latter had a portfolio heavily weighted by „atomic bomb” type of real estate assets, which made it impossible to “pass the stress test”, lest it would give the game away.
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Notwithstanding this undemanding stress test, several other banks passed so narrowly that they may face market pressure to increase reserves. That group included Postbank, one of Germany‟s biggest publicly traded banks, which is based in Bonn and is 25 percent owned by Deutsche Bank. It is difficult not to question the validity of the stress test of European banks saturated with government bonds and other long-term public debt instruments considering that the supposed “worst case scenario” envisions no possibility of a sovereign debt default in Europe, This, in the face of countries on the verge of economic collapse such as Greece.
Furthermore, apparently not a single UK bank is in danger from worsening economic developments, despite a warning issued by analysts at the Royal Bank of Scotland to senior British policymakers in January 2009, entitled “Living on a Prayer,” which stated that almost the entire banking sector of the United Kingdom was “technically insolvent.”
In February 2009, the European Union‟s own executive branch, the European Commission, issued a confidential report, subsequently leaked to the British newspaper, The Daily Telegraph, which warned that European banks collectively held as much as 18.6 trillion Euros in toxic assets.While we do not believe that the stress test performed on U.S. banks was much more rigorous, the European version seems to be conspicuously lacking in this characteristic.
CPI over 6% (Opportunity).
While it is difficult to fathom when would such an event occur, we believe firmly that it eventually will. The current administration is increasingly looking similar to that of Jimmy Carter which led to the U.S. economy experiencing inflation seen only very few times since the Civil War, leading to a record high 21.5% prime rate in 1980 and a CPI of 13.5% in the same year.
The current administration –with the blessings of the Fed- has been shoveling enormous amounts of money into the financial system. The problem is that banks have chosen to sit on that cash, and it is not being lent out to consumers and firms. Compounding the situation, corporations are also sitting on cash amounting about a trillion dollars which is not directed at investments or hiring of personnel. This situation is most likely due to the uncertainty prevailing in the economy. However, once there is a generalized perception that the economy is on the growth path, all this money will be showered over the economy, probably with explosive consequences, in the sense that people will have money in their pockets, but the service and manufacturing structure may not be prepared to fulfill short and medium term demand, after years of cutbacks in production and personnel. At a certain point, this will most likely create a high level of inflation.
We estimate that such an economic environment would favor the company greatly, as most people will prefer to buy assets now, exchanging it for their money which is losing its value. To be able to buy assets however, people with the means to buy them on credit will need to improve their FICO scores.
Israel (the U.S. or both) attacks Iran militarily (Risk).
We estimate that there is a higher than 50% chance that Israel will attack Iran militarily before the end of 2011, either alone or together with the U.S. because Israel perceives Iran as a serious threat to its national security. Furthermore, in an August 13th 2010 article John Bolton (former U.S. ambassador) calls for an immediate attack on Iran. He argues that Russias‟s impending loading of nuclear fuel into Iran plant merits it3. In December of this year, the Pentagon expects to have a new super bunker buster bomb ready for deployment which does not allay fears of a strike on Iran. The first 15 ton MAP-Massive Ordnance penetrator behemoth is estimated to be the only munitions in the U.S. arsenal with the required capability of penetrating and destroying Iran‟s deep underground nuclear facilities It is unclear why some developed countries strongly fear that a nuclear Iran would attack Israel, a country widely believed to have an important number of atomic bombs in its arsenal and the necessary delivery systems. Most likely, U.S. satellites would give Israel early warning of such an attack, which could in turn launch a devastating hit on Iran. It is likely that Iran is very much aware of this for which it is hard to believe it would execute such a misguided aggression. Nevertheless, considering that Israel has launched preemptive attacks before (Iraq, Syria) without suffering major political-economic consequences, it would seem it is poised to do it again.
Iran on the other hand is a much more powerful country than Iraq or Syria, and we estimate that such a move by Israel would have far more negative reaching effects, mainly because we believe this may trigger massive retaliatory attacks on Israeli and western targets around the world. We have no doubts that in such a case, the price of oil will escalate to new heights and the world may sink into a deep recession.
According to the CIA Fact Book 2010 estimates, Iran‟s population stands at 67,037,517 compared to 22,198,110 inhabitants for Syria, the object of the latest Israeli major pre emptive strike. A further comparison between both countries on the economic front shows the following data:
Syria
GDP (purchasing power parity): $100.7 billion (2009 est.)
GDP - per capita (PPP): $4,600 (2009 est.)
Iran
GDP (purchasing power parity $876 billion (2009 est.)
GDP - per capita (PPP):$12,900 (2009 est.)
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The point we are trying to make is that, while an unprovoked publicly unacknowledged attack on Syria in 2007 did not bring much fallout, and certainly no retaliatory reaction from Syria, a preemptive attack on Iran could prove to be a very different matter, as the latter has a much larger industrial base, population and armaments industry. This is well apart of the power of Iran to inflict serious attacks on Israeli targets using proxy terrorist movements such as Hezbollah. Furthermore, we do not reject out of hand the possibility that Iran has planted “sleeping cells” in western countries and Israel, which would become active once Iran is attacked.
North Korea attacks a third country (Risk).
We believe that an attack by North Korea against South Korea or Japan could involve nuclear weapons. The totalitarian regime has atomic bombs and the required delivery system. A simple onrush of troops powered by conventional weapons, crossing the border would be eventually contained, and rapidly followed by a decisive counter attack of South Korean forces and her allies leading to a loss of face and matériel difficult to replace, considering the dire condition of North Korea‟s economy. This is well apart of the political consequences for North Korea‟s government. Conversely, a –by some accounts- mentally unbalanced Kim Jong il may conceivably think that a “localized” tactic nuclear strike would be the cheapest and most decisive way to “make a statement” to get more concessions from the West, thinking for example, that the U.S. would not retaliate with a nuclear counter attack, provided that his own nuclear strike hits a relatively unpopulated area of the targeted country (or hitting an area say, 20-50 miles off the coast of Japan, for example). We all know how moves like this have resulted in rather tragic miscalculations. Kim Jong Il seems to be ready to hand over power to his son who is currently in his 20s and is the chief of the country‟s secret police. He may want to establish credibility for his son with some radical measure. The CIA considers this a dangerous period4.
A major terrorist attack in the U.S. soil occurs (Risk).
We find it quite remarkable that since 9/11 2002 no terrorist organization has found a way to perpetrate an attack of any magnitude somewhere in the U.S. This can, however happen anytime; it would be a “black swan” event (see appendix 4) and depending on the magnitude, it could also have serious economic consequences derived from the political fallout. The consequences could be substantially bigger if the attack is clearly identified as originating from a hostile country.
Chaos in Iraq (Risk).
The current U.S. administration is announcing a complete troop withdrawal from Iraq effective next year, ending thus U.S. intervention in that country. The White House issued assurances that Iraqi troops are up to the task. Contrary to this assessment, Lt. Gen. Babakir Zebari5 told reporters in a news conference on August 12th that it will be another 10 years before Iraq's military is able to cope without help from U.S. forces. He stated “At this point, the withdrawal (of US forces) is going well, because they are still here," Zebari told AFP on the sidelines of a defense ministry conference in Baghdad. "But the problem will start after 2011 -- the politicians must find other ways to fill the void after 2011”.
All American troops must leave Iraq by the end of next year, according to the terms of a bilateral security pact, and President Barack Obama has insisted that the ongoing withdrawal is on schedule and will not be altered.
We find some strong similarities with the situation in Viet Nam in 1972-73. In December 1972 Nixon wanted to end an unpopular war as soon as possible, so he unleashed Operation Linebacker II (aka “The Christmas bombing”). It was the largest and most intense heavy bomber strike launched by the U.S. Air Force since the end of World War II. We could call it “The Surge”, using current terminology. It did bring the North Vietnamese to the negotiation table. In January 1973 the Paris Peace Accord was signed, the U.S. declared victory and started the troop pullout, leaving the military responsibility to the South Vietnamese troops. As soon as the bulk of U.S. troops left, the North Vietnamese moved in, restarted the war and took over South Vietnam in less than two years.In the case of Iraq, “The Surge” has decreased military violence because the country was saturated with U.S. and allied troops, and due to the deployment of cutting edge technology. The problem is that as in the case of Viet Nam, in Iraq the U.S. is dealing with a most determined enemy who does not care about human losses and is bidding his time until the U.S. leaves. When this happens, there is a good chance that with the help of Iran, the insurgents will topple the democratic government, execute many and send many others to “Madrasas” for reeducation: In short, a Vietnam redux. As in the case of Viet Nam, after pulling out of Iraq, there is hardly any probability of the U.S. “going in” again.
A double dip recession occurs (Risk).
There is discussion among some economists about the possibility of the economy falling into a new recession after a short lived recovery period. Some countries in Europe are coming out of the recession led by Germany and the same is occurring in many other countries in the world. It is very likely that the recovery will be uneven, taking more time in some countries than in others. However, when we consider the sheer numbers representing the billions of dollars governments worldwide have poured into the various economies, it is difficult to think that recession will return in the near future after the recovery -however slow- is underway.
Some stimulus packages like those introduced by the U.S. and many governments have been the focus of most of the attention. However, many other countries in the world including emerging countries have jumped in the bandwagon trying to boost their economies by pumping in billions of dollars. China‟s stimulus for example, has been substantially larger as a percentage of GDP than the one enacted by the U.S. government. While all this money in circulation will most likely be the cause of a substantial rise in inflation rates later on, we do not believe that in the near future any government will allow its economy to slip back into a new recession.
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A common definition of a double dip recession is for the US economy entering into a recession within a period less than 12 months following the end of the previous recession.
According to the National Bureau of Economic Research (NBER), the most authoritative source of information regarding business cycles, there have been 33 recessions registered in the US since 1854. Over this entire time frame, there have been only three recorded instances of a double-dip recession by the definition provided above. The first one was in 1913, the second in 1920, and the third in 1981.
Should we make the definition of a double-dip more to include all recessions within 18 months of the end of the previous recession, the number of occurrences of double-dips rises only slightly to five.There were two instances of double-dips in the 91 year period from 1854 to 1945, which comprised a total of 22 business cycles. And there was just one instance a double-dip in the 11 business cycles that took place during the 65 years that have transpired since 1945. We may also add that the 1981 was induced by the Carter Administration to put a stop to the high level of inflation raging in the U.S. U.S. President Jimmy Carter imposed credit controls in March 1980, which resulted in a sharp but short-lived recession before the economy expanded again for 12 months. Then U.S. Federal Reserve Chairman Paul A. Volcker hiked short-term interest rates to 20% in the summer of 1981, as he pushed the economy back into recession while dealing a death blow to inflation. This time around, we firmly believe that the current administration will be ready and willing to keep the money spigot open, irrespective of the consequences, as long as it helps dodging a double-dip downturn. There is one scenario which we believe could create severe political turmoil, sending the price of oil up to record levels plunging the world into a new recession, this time originated by a political and military event: We are referring to a military attack against Iran. We consider this a potentially catastrophic event if it occurs and one that is considered and is factored in our model. Furthermore, we have correlated this event with the possibility of a double dip recession.
Description of the Model
The company wishes to estimate the certitude of achieving a certain level of EBIT, as forecasted in the first year P&L pro forma statement included in the business plan (see table below). Sales for the first year have been estimated at $1.8 million. Cost of goods and operating expenses are expected to be $156,529 and $1,200,780 respectively. The results obtained after running the model will show the amount of operating expenses that can be expected under various probability confidence levels.
|
TOTAL SALES
|
$ | 1,800,000 | 100 | % | ||||
|
Cost of Goods Sold
|
$ | 156,529 | 9 | % | ||||
|
Gross Profit
|
$ | 1,643,417 | 67 | % | ||||
|
Operating Expenses
|
$ | 1,200,780 | 91 | % | ||||
|
EBIT ( Operating Earnings )
|
$ | 442,691 | 25 | % |
We have modeled operating earnings, generating results under four confidence levels. The characteristics of the distributions used to forecast operating earnings are:
● Sales :BetaPERT $1,620,000, $$1,800,000, $1,980,000
● Cost of Goods Sold :BetaPERT $125,000, $156,529, $187,835
● Operating Expenses :BetaPERT $1,080,702, $1,200,780, $1,320,858
● Random Events :Binomial (Bernoulli). The probability estimated for each event is indicated in the risk matrix above.
● Economic impact :BetaPERT. The values for the min., most likely and max. results are detailed in each case in the risk matrix above as a percentage on sales.
● Number of trials :100,000
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EBIT PROB. TO
This means that the expected value may be at least the minimum shown in the first column.
$442,691 29.64% Original forecasted operating earnings
$320,571 60.00% Highest modeled result
$259,451 75.00% Medium modeled result
$181,539 90.00% Lowest modeled result
PROBABILITY – CERTAINTY RANGES
This means that the expected value may fall within the interval, at the stated confidence level.
Confidence level : 90%
Max : $623,352
Min : $145,441
Confidence level : 75%
Max : $546,065
Min : $203,027
Confidence level : 60%
Max : $495,149
Min : $238,447
Stress test
This type of test involves subjecting the model to financial stressful conditions by adding what we call the “Armageddon Event (see appendix 4) to the other random events in order to evaluate its effect on the forecast. In this particular case, the origins of the events causing the extreme negative effects are irrelevant which is fine, because they may be totally unfathomable a priori. What is relevant is the effect such events would cause if taking place. Subjecting the model to extreme values will help us learn the magnitude of the consequence of such very unlikely impact, in the event that it occurs.
After running the model under stress condition (all previous modeled events plus the AE, we obtain the following results.
Probability 75% ∞ : ($40,478)
PROBABILITY – CERTAINTY RANGES
This means that the expected value may fall within the interval, at the stated confidence level.
Confidence level : 90%
Max : $ 592,808
Min : $(271,499)
Confidence level : 75%
Max : $498,351
Min : $(192,503)
-26-
Confidence level : 60%
Max : $442,084
Min : $(101,830)
Black Swan Results
We estimate the values to be obtained (including the AE) by calculating the mean of the first and 99th percentiles, that is, of the distribution tails.
1% : $(442,341) This value is the highly unlikely minimum EBIT level.
99% : $ 780,311 This value is the highly unlikely maximum EBIT level.
Sensitivity Analysis
These charts depict the assumptions influencing operating earnings the most. They reflect the sensitivity of the forecasted earnings vis á vis the assumptions and the assumption‟s uncertainty.
As we can see below, the sensitivity chart shows that the two most influential assumptions are Operating Expenses and Sales, in that order. What this means is that, by diminishing the uncertainty in the highest ranking influential assumptions in future revisions with more data at hand, a higher degree of accuracy in the estimated forecast could be achieved.
Validation
We have checked the syntax and general formulae of the model and are confident that they do not contain errors. Furthermore, we believe that the logic based upon which variances and random events assumptions were selected is correct. We have also tested results using different distributions to detect possible important variances in the results and if so, investigate the underlying reasons. No significant deviations from the original results were found.
Startup Investment & ROI
To launch the project, the company requires a certain amount of money, broken down as follows:
$115,000 Startup investments in period zero
$885,000 Required cash
$1,000,000 Total
The estimated ROI (on the original investment) considering operating earnings at a 75% to ∞ certitude level would be the following:
|
Probability
|
60 | % | 75 | % | 90 | % | ||||||
|
ROI
|
32 | % | 26 | % | 18 | % | ||||||
|
Operating Earnings
|
320,571 | 259,451 | 181,539 | |||||||||
|
Investment
|
1,000,000 | 1,000,000 | 1,000,000 |
-27-
APPENDICES
We have added a section containing appendices related to issues concerning quantitative risk analysis, its origins, applications and results. The reason to include these appendices is to provide additional information on the fundaments of the technique used in this analysis.
PROBABILITY THEORY
It should firstly be said, that there is no technology or methodology available today, capable of predicting future events with 100% certitude. Having said that, it should also be noted that by using statistical techniques like Monte Carlo simulation, it is possible to determine the probability of events occurring in the future, under various probability confidence levels. Girolamo Cardano, an Italian 16th century physician wrote a book describing his observations throwing dice, providing thus some insight in the area of probability. However, he as well as Galileo some years later stopped short of determining whether there was a way to use their findings to predict the future. Most agree today that the modern probability theory has its origins in an exchange of letters between the Frenchmen Blaise Pascal and Pierre de Fermat in 1654. This was the foundation on which a general theory to predict likely events in the future was created.
The probability theory affects us all in our daily lives, as it is used to determine the cost of premiums of life policies for example, the weather forecast, estimate the success probability of a surgical procedure, predict the winner in a presidential race and much more. We make every day decisions of many kinds based on the probabilities associated with a particular situation.
Nowadays, all kind of traditional forecasts (sales, profits, construction projects, etc.) are made using deterministic models (excel spread sheets) to estimate possible outcomes, such as the typical worst, most likely and optimistic scenarios of a particular event occurring in the future. Departing from the perceived risk, others characterize the attractiveness of a particular project as being “good”, “very good”, “more or less good”, “good but….”, “acceptable”, “bad”, “not very good”, etc. These adjectives provide a limited assessment of the risk involved, especially when uttered by other people who may have a different risk tolerance than others.
By building and running simulation models it is possible to quantify risk by assigning probability levels to future outcomes. Now, instead of using adjectives, we can state that a particular forecast has a say, 75% probability of occurring. If the latter refers to say, the expected profit to be earned, based on that and depending on their particular yields expectations and risk tolerance, each will determine how attractive (or not) is that project. This is a quantum leap vis à vis the traditional spread sheet deterministic models allowing for a few possible scenarios only.
TECHNOLOGY USED, ITS ORIGINS AND DESCRIPTION
Monte Carlo simulation is a statistical methodology developed by the scientists John von Neumann and Stanislaw Ulan to work on solving statistical problems related to atomic bomb design, within the “Manhattan Project” during WWII. Monte Carlo was the code word for the methodology being developed. Since that time, the Monte-Carlo method has been used for the simulation of random variables and is based upon the principle of taking samples of random variables from their defined probability density functions.
Up to a few years ago, simulation analyses could only be made by using very powerful computers available only to big corporations and government institutions. Nowadays, most PCs have enough processing speed to run simulations. The method may be described as the most powerful and commonly used technique for analyzing complex statistical problems which cannot be solved mathematically.
A Monte Carlo simulation model like the one used in this risk analysis report is a technique part of the armamentarium resorted to by the largest corporations, routinely making investment decisions running into the millions of dollars. A model like the one presented here allows you to peek into the future, by testing thousand of possible outcomes, and the probability of their occurrence, under different confidence levels. In fact, we could say a simulation model maps the future and on top of that, it tells us the probability of a certain occurrence taking place.
Applying this technique, it is possible to answer a question such as, what is the probability of reaching a certain profit amount, a certain sales level or the probabilities that a certain construction project will be completed within the time and budget allotted. For example, after running the model we may find that the probability of achieving or surpassing the likely case scenario (sales, profits, etc.) is 84%. This will allow investors, banks, your boss or yourself to make an informed decision. Conversely, you may find out, that the certainty of the most likely case scenario is 12%. This is not what we expected, in which case, we will factor in new assumptions in the model and run new trials to see if the results can be improved.
-28-
THE GERMAN V1 FLYING BOMB
While stochastic simulation is increasingly being used nowadays especially by larger companies with great success, the results of these analyses rarely reach the general public. There is however one well known, very famous historical example which provided information that can safely be characterized to have had literally life or death consequences.
From mid 1944 on during WWII the Germans began showering London with V1 flying (“Buzz”) bombs, the precursor of the guided cruise missile. Within a year 1600 people had been killed by flying bombs.
It was unknown at that time, whether the V1s possessed an accurate aiming devise which would allow precision hits, or were built with a very rudimentary guidance system. If the bombs were accurate, the British authorities would have to immediately start evacuating people living close to high value targets. Otherwise, there was no point in ordering any evacuation. As the Germans were not about to tell the British how accurate their V1s were, authorities tapped British statisticians who decided to build a model based on the Poisson distribution to determine the accuracy of the bombs.
They divided the entire area where the bombs landed into a grid of 576 small areas of size one quarter square kilometer each. The table below records the number of squares with 0, 1, 2, 3 etc hits each. The total number of hits is 537. The average number of hits per square is then 537/576= 0.9323 hits per square. Had the bombs been accurate, there would be a higher frequency of squares with either no impacts or many (1, 2, 3 or more) impacts. On the other hand, if there were no tendency of the impacts to cluster, then the probability that a square is hits one or more times is governed by a Poisson distribution.
As can be observed below, the Poisson model described with great approximation the frequency of the impacts. For example, 211 squares were hit with one bomb; the Poisson distribution predicted that 211.4 bombs would land on one square.
V1 FLYING-BOMB HITS ON SOUTH LONDON (576 squares with 537 hits)
|
Nr of hits
|
0 | 1 | 2 | 3 | 4 | 5 | ||||||||||||||||||
|
Nr of cells with # of hits above
|
229 | 211 | 93 | 35 | 7 | 1 | ||||||||||||||||||
|
Poisson prediction
|
226.7 | 211.4 | 98.5 | 30.6 | 7.1 | 1.6 |
With the information generated by the Poisson model in hand, it was clear now that the V1 bombs did not have an accurate aiming devise due to which no evacuation was necessary.
OF BLACK SWANS AND ARMAGEDDON
Black Swan Events.
For about 1500 years, people thought all swans were white, until in 1697 cygnes atratus (black swan) was discovered in Australia. Before that, people referred to a black swan as something that was impossible. The theory of the black swan was recently developed by Nasim Taleb who defines a black swan event as:
● An outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility.
● It carries an extreme impact.
● In spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
-29-
Black swan events are impossible to predict by definition and we would seem to contradict this tenet with our estimation, which is of course true. The idea however is to define a black swan arbitrarily, for the company to provide for the case that negative events occurs and to be ready to exploit the positive ones. Past and recent history is full of black swan events, positive and negatives. Wars, the success of ideas, religious thought, the dynamics of historical events, elements of our own personal lives, the 9/11 attack on the twin towers, the emergence of Microsoft and Google, all are black swans. The point is that chance (luck) is an exceedingly more important factor than the overwhelming majority of people imagine.
This notwithstanding, the media is constantly inflicting upon us the "expert opinion" of self appointed financial "pundits" dishing out all kinds of predictions most of which are wrong, while others continue to write misguided books about what you need to imitate from millionaires, to become one.
The reality is that chance/luck trumps skills every time. When Bill Gates created Microsoft for example, there were thousands upon thousands of other people with the same or better skills (some may even have had the same name as his!) and all the other attributes Bill Gates had, who did not succeed as he did. The difference was that the others were not presented the opportunities Bill Gates was.
What this all mean is that the traditional deterministic analysis is definitely and clearly out, and that the only sensible approach to confront randomness is by applying stochastic processes like the quantitative risk analysis presented here. Additionally, it is also advisable to stress the model by factoring in the possible consequences of rare and unpredictable, but devastating events like the Armageddon event, discussed next. The possible positive black swans reside in the 99th percentile of the frequency distribution as highly unlikely events and the negative in the 1st percentile, as depicted in the report.
Globalization creates interlocking fragility among institutions worldwide, thus multiplying the destructive (or positive) effect of many local events.
The Armageddon Event.
To stress test the results of the model, we factor in a composite indicator which we call the “Armageddon event”, developed by our company. It is a mathematical aggregation of a set of events likely to affect the company plus other considerations, having a certain probability of occurring and resulting in an exceedingly negative event. One difference between a Black Swan and an Armageddon event is that while Black Swan events may be positive as well as negative, the Armageddon event is negative only. Black Swans reside in the tails of the distributions. The Armageddon event has a higher probability of occurring, as it is variously estimated as between the 50th and 90th percentile of the various probability values in the probability-impact table. We may increase/decrease the level of stress of the test if required. The point is to submit the forecast of interest to a significant economic impact, originating however from the events listed in the probability-impact table.
Some may say that there is no need to create a composite indicator representing an exceedingly negative event. In other words, that it does not need to be composite. Others may also opine that it does not jive with the essence of an unpredictable devastating event which could be of a more devastating magnitude.
We want it to be of a systemic nature, so to achieve this it is necessary to involve data related to the particular project. By using this procedure we build an event of certain characteristics, different in each case. The Armageddon event carries an overwhelming devastating power.
Conceptually however, we could hardly say it is the „worst case scenario” because there may always be an even worse case scenario lurking out there. For example, no matter how devastating an economic scenario we factor into the stress test, it would be easily surpassed by the consequences of an asteroid the size of the state of New Hampshire hitting the Atlantic ocean off the Florida coast, especially if your project involves a hotel located in Miami Beach!. On the other hand, a financial risk so large as to cause the demise of the company is –for all practical purposes- not more important than the consequences of the asteroid impact above described. While in the case of the asteroid there would obviously be a great loss of lives to regret, the consequence for the company would be the same, namely its demise in either case. We believe that our stress test provides a valuable insight into the possible consequences of a highly negative event taking place. The economic impact will vary depending on the degree of certitude and the value of the economic impact caused by the other random events listed.
Characteristics of the Armageddon event as follows:
● Conceptually, it is not the absolute worst case scenario, as there is no such thing which can be confidently factored into a model. It would be hardly possible to determine every possible rare event that could conceivably occur affecting the project. On the other hand, it carries an overwhelming devastating potential, as if most of the negative events listed in the project‟s p-i table, occur.
● It is systemic. While it has no specific origin, the probability of it occurring and its economic effects are related to the dynamics and the data of the project of interest.
● It is composite because it is an indicator containing many negative elements; it does not mean it should be considered as a bevy of “bad black swans”.
REFERENCES
(1) http://money.cnn.com/2010/08/30/news/economy/debt_fears.fortune/index.htm
(2) http://www.ftc.gov/opa/2010/07/tsr.shtm
(3)http://www.newsmax.com/Headline/John--Bolton--Iran--Nuclear--israel/2010/08/13/id/367449
(4)http://www.sinolinx.com/frame/?url=http://rss.businessweek.com/~r/bw_rss/asiaindex/~3/41yezl7jgdM/cia-chief-panetta-says-north-korea-s-kim-preparing-succession.html
(5)http://www.guardian.co.uk/world/2010/aug/12/iraqi-army-not-ready-general
-30-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides the names and addresses of each person known to ACT who own more than 5% of the outstanding common stock as of the date of this prospectus, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.
|
Name and address of beneficial owner
|
Amount of
beneficial
ownership
|
Percent
owned
|
|||
|
Chris Jackson
1915 Plaza Drive, Suite 202, Eagan, MN 55122
|
5,500,000 | ||||
|
Enrico Giordano
1915 Plaza Drive, Suite 202, Eagan, MN 55122
|
5,000,000 | ||||
|
Chris Giordano (1)
1915 Plaza Drive, Suite 202, Eagan, MN 55122
|
900,000 | ||||
|
Mercury Assets Partners, LLC
1915 Plaza Drive, Suite 202, Eagan, MN 55122
|
1,208,000 | ||||
|
Phoenix Holdings, LLC
1915 Plaza Drive, Suite 202, Eagan, MN 55122
|
820,000 | ||||
|
Gemini Funding Group, LLC
1915 Plaza Drive, Suite 202, Eagan, MN 55122
|
800,000 | ||||
|
All officers and directors as a group (2)
|
10,500,000 | ||||
|
|
(1)
|
Principal of Birchwood Capital LLC and includes ownership of 200,000 shares.
|
The percent of class is based on _____17,102,000________ shares of common stock issued and outstanding as of the date of this prospectus.
OFF-BALANCE SHEET ARRANGEMENTS
ACT does not have any off-balance sheet arrangements.
EXECUTIVE COMPENSATION
The table below sets forth all cash compensation paid or proposed to be paid by us to the chief executive officer and the most highly compensated executive officers, and key employees for services rendered in all capacities to the Company during fiscal years, 2008 and 2009.
-31-
Summary Compensation Table
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change in
Pension
Value and
Non qualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
|
|
|||||||||
|
Chris Jackson, COO, Director
|
2008
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
|
2009
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Enrico Giordano, Treasurer
|
2008
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
2009
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Compensation Policy. Our officers are expected to receive the compensation set forth above..
Stock Option. At this time, our directors and officers have not received any stock options or freestanding SARs.
Bonuses. To date no bonuses have been granted. Any bonuses granted in the future will relate to meeting certain performance criteria that are directly related to areas within the executive’s responsibilities with the Company. As the Company continues to grow, more defined bonus programs will be created to attract and retain our employees at all levels.
Stock Option Plans
Our board of directors has not adopted any Stock Option Plans as of the date of this prospectus, however, we do intend to reserve 3,500,000 shares for a Stock Option Plan for management and employees.
Compensation of Directors
Directors are currently reimbursed for expenses incurred during their duties.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our executive officers and directors and their ages as of June 30, 2010 are as follows:
Executive Officers and Directors
|
Name
|
Age
|
Office
|
Since
|
|||
|
Chris Jackson
|
45 |
President, Chief Operating Officer, Director
|
Inception
|
|||
|
Enrico Giordano
|
51 |
Treasurer
|
Inception
|
|||
-32-
The term of office for each director is one year, or until the next annual meeting of the shareholders.
Biographical Information
Set forth below is a brief description of the background and business experience of our executive officers and directors.
Chris Jackson. Mr. Jackson is a founder and will serve as the President and Chief Operating Officer. Mr. Jackson graduated from Texas Lutheran University with a BA 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. While owning his own company during the past 5 years, he has overseen the construction and implementation of ACT’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 will devote 100% of his time to revenue generation and sales support within the Company.
Enrico Giordano. Mr. Giordano is a founder and will serve as the Company Treasurer and will take on a more significant role as he helps grow the company. Mr. Giordano 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. He has also been instrumental in structuring and negotiating on behalf of ACT. 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 ACT. From price point to structure as well as the marketing of the product to affiliate programs which are now ready to 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. Mr. Giordano has taken no salary as a testament to his devotion and belief in the potential of the ACT system. The Company will seek out further management to insure its success and growth.
Advisory Board
ACT intends to add seasoned professionals to its advisory board from time to time.
Board Committees
ACT has not yet implemented any board committees as of the date of this prospectus.
Employment Agreements
There are currently two employment agreements with each of the Company’s officers. The Agreements have been filed as exhibits to this registration.
Significant Employees
ACT has no significant employees other than the officers and directors described above, whose time and efforts are being provided to Advanced Credit Technologies, Inc. with compensation.
-33-
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
As of the date of this prospectus, there is no public market in our common stock. This prospectus is a step toward creating a public market for our common stock, which may enhance the liquidity of our shares. However, there can be no assurance that a meaningful trading market will ever develop. ACT and its management make no representation about the present or future value of ACT’s common stock.
As of the date of this prospectus, there are no outstanding options or warrants to purchase, or other instruments convertible into, common equity of the Company and other than the stock registered under this Registration Statement, there is no stock that has been proposed to be publicly offered resulting in dilution to current shareholders.
As of the date of this document we have approximately ____17,102,000________ shares of common stock outstanding held by _51____ shareholders. These shares of common stock are restricted from resale under Rule 144 until registered under the Securities Act, or an exemption is applicable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Conflict of Interest
The current President of the Company currently devotes full-time to the Company. If a specific business opportunity becomes available, such person may face a conflict in selecting between our business interest and their other business interests. The policy of the Board is that any personal business or corporate opportunity incurred by an officer or director of ACT must be examined by the Board and turned down by the Board in a timely basis before an officer or director can engage or take advantage of a business opportunity which could result in a conflict of interest.
None of the following parties has, since the date of incorporation, had any material interest, direct or indirect, in any transaction with the Company or in any presently proposed transaction that has or will materially affect us:
|
●
|
The Officers and Directors;
|
|
|
|
●
|
Any person proposed as a nominee for election as a director;
|
|
●
|
Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to the outstanding shares of common stock;
|
|
|
●
|
Any relative or spouse of any of the foregoing persons who have the same house as such person.
|
There are no promoters being used in relation with this offering. No persons who may, in the future, be considered a promoter will receive or expect to receive any assets, services or other consideration from the Company. No assets will be or are expected to be acquired from any promoter on behalf of the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Since inception until the present time, the principal independent accountant for the Company has neither resigned, declined to stand for reelection, nor have been dismissed. The independent accountant for the Company is Stan J.H. Lee, CPA, P.A.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
Our By-laws provide for the elimination of the personal liability of our officers, directors, corporate employees and agents to the fullest extent permitted by the provisions of Nevada law. Under such provisions, the director, officer, corporate employee or agent who in his/her capacity as such is made or threatened to be made, party to any suit or proceeding, shall be indemnified if it is determined that such director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of our Company. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and persons controlling our Company pursuant to the foregoing provision, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court's decision.
-34-
ADVANCED CREDIT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 25, 2008 (INCEPTION)
THROUGH JULY 31, 2010
-35-
|
Advanced Credit Technologies, Inc.
|
||||||||
|
(A development stage enterprise)
|
||||||||
|
Balance Sheets
|
||||||||
|
(Unaudited)
|
||||||||
|
July 31,
|
December 31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Assets
|
||||||||
|
Current assets
|
||||||||
|
Cash in bank
|
$ | 31,240 | $ | 9,626 | ||||
|
Total assets
|
31,240 | 9,626 | ||||||
|
Liabilities and stockholders' deficit
|
||||||||
|
Current liabilities
|
||||||||
|
Accrued expenses
|
3,000 | 6,000 | ||||||
|
Notes payable - Related parties
|
-- | 6,400 | ||||||
|
Accrued interest
|
193 | 1,027 | ||||||
|
Due to related parties
|
5,524 | 5,524 | ||||||
|
Total liabilities
|
8,717 | 18,951 | ||||||
|
Stockholders' deficit
|
||||||||
|
Common stock 100,000,000, $.001 par value shares
|
||||||||
|
authorized, 15,800,000 and 14,515,000 issued
|
||||||||
|
and outstanding
|
15,800 | 14,515 | ||||||
|
Additional paid-in capital
|
352,492 | 224,660 | ||||||
|
Deficit accumulated during the development stage
|
(345,769 | ) | (248,500 | ) | ||||
|
Total stockholders' deficit
|
22,523 | (9,325 | ) | |||||
|
Total liabilities and stockholders' deficit
|
$ | 31,240 | $ | 9,626 | ||||
See accompanying notes to financial statements
-36-
|
Advanced Credit Technologies, Inc.
|
||||||||||||
|
(A development stage enterprise)
|
||||||||||||
|
Statements of Operations
|
||||||||||||
| (Unaudited) | ||||||||||||
|
February 25, 2008
|
||||||||||||
|
Seven Months
|
Seven Months
|
(Inception)
|
||||||||||
|
Ended
|
Ended
|
through
|
||||||||||
|
July 31, 2010
|
July 31, 2009
|
May 31, 2010
|
||||||||||
|
Revenues
|
$ | 15,091 | $ | 37,657 | $ | 80,700 | ||||||
|
Commissions paid
|
- | 25,877 | 44,360 | |||||||||
|
Gross margin
|
15,091 | 11,780 | 36,340 | |||||||||
|
Operating expenses
|
||||||||||||
|
Professional fee
|
12,864 | 1,750 | 18,864 | |||||||||
|
Consulting fees
|
- | - | 213,975 | |||||||||
|
Officer's compensation
|
24,375 | - | 24,375 | |||||||||
|
Travel and entertainment
|
10,531 | 11,438 | 30,179 | |||||||||
|
Rent
|
4,800 | 4,800 | ||||||||||
|
Computer and internet
|
7,100 | 7,100 | ||||||||||
|
Research and development
|
34,500 | 6,708 | 52,400 | |||||||||
|
Office supplies and expenses
|
14,726 | 14,726 | ||||||||||
|
Other operating expenses
|
3,197 | 5,830 | 14,396 | |||||||||
|
Total operating expenses
|
112,093 | 25,726 | 380,815 | |||||||||
|
Loss from operations
|
(97,002 | ) | (13,946 | ) | (344,475 | ) | ||||||
|
Interest expense
|
267 | 267 | 1,294 | |||||||||
|
Net loss
|
$ | (97,269 | ) | $ | (14,213 | ) | $ | (345,769 | ) | |||
|
Earnings per share
|
$ | (0.01 | ) | $ | (0.00 | ) | ||||||
|
Weighted average shares outstanding
|
14,908,009 | 14,265,000 | ||||||||||
See accompanying notes to financial statements
-37-
ADVANCED CREDIT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 25, 2008 (INCEPTION)
THROUGH JULY 31, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
On February 25, 2008, Advanced Credit Technologies, Inc. (the “Company”) was incorporated in the State of Nevada.
Advanced Credit Technologies, Inc. provides a state of the art credit management platform that is a web based delivery system. Industries that benefit from the Company’s technology include realtors, auto dealers and loan originators.
The Company has limited operations and in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) is considered to be in the development stage.
Basis of Presentation
Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ from the estimates.
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.
Cash and Cash Equivalents
Cash equivalents are comprised of certain highly liquid investments with maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses related to this concentration of risk. As of July 31, 2010 and December 31, 2009 the Company had $0 in deposits in excess of federally-insured limits.
Research and Development, Software Development Costs, and Internal Use Software Development Costs
Research and development costs are charged to operations as incurred.
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 cancelled 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.
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During the seven months ended July 31, 2010, and for the period February 25, 2008 (inception) through July 31, 2010, we have capitalized external and internal use software and website development costs totaling $-0- and $-0-, respectively. The estimated useful life of costs capitalized is evaluated for each specific project and ranges from one to three years.
Advertising Expenses
Advertising costs are expensed as incurred. The total advertising expenses included in the Statement of Operations for the five months ended July 31, 2010 and for the period February 25, 2008 (inception) through July 31, 2010 were $144 and $144, respectively.
Fixed Assets
The Company records its fixed assets at historical cost. The Company expenses maintenance and repairs as incurred. Upon disposition of fixed assets, the gross cost and accumulated depreciation are written off and the difference between the proceeds and the net book value is recorded as a gain or loss on sale of assets. The Company depreciates its fixed assets over their respective estimated useful lives ranging from 3 to 5 years.
Intangible and Long-Lived Assets
The Company follows FASB ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Through July 31, 2010, the Company had not experienced impairment losses on its long-lived assets.
Research and Development
In accordance with ASC Topics 985 and 350 the Company has recorded all costs incurred to establish the technological feasibility of computer software product to be sold, leased, or otherwise marketed are researched and development costs. For the seven months ended July 31, 2010 and for the period February 25, 2008 (inception) through July 31, 2010 the Company recorded research and development costs of $34,500 and $52,400 respectively.
Revenue Recognition
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed and determinable, and collectability is reasonably assured. Determining whether some or all of these criteria have been met involves assumptions and judgments that can have a significant impact on the timing and amount of revenue the Company reports.
Cost of Revenues
The Company records commissions paid to subcontractors directly involved in the production of revenue as cost of sales.
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.
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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 as of July 31, 2010.
Income Taxes
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, 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.
Net 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.
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At December 31, 2009 and December 31, 2008, no potentially dilutive shares were 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.
|
Income (loss)
|
Shares
|
Per Share
|
|||||
|
(Numerator)
|
(Denominator)
|
Amount
|
|||||
|
|
|||||||
|
For the Year Ended December 31, 2009:
|
$
|
(24,548)
|
14,280,753
|
$
|
(0.00)
|
||
|
Basic and diluted EPS
|
|||||||
|
Income to common stockholders
|
|||||||
|
For the period February 25, 2008 (inception) through December 31, 2008:
|
$
|
(223,952)
|
4,064,548
|
$
|
(0.06)
|
||
|
Basic and diluted EPS
|
|||||||
|
Income to common stockholders
|
|||||||
Stock Based Compensation
The Company adopted FASB ASC Topic 718 – Compensation – Stock Compensation (formerly SFAS 123R), which establishes the use of the fair value based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services are rendered. For stock based compensation the Company recognizes an expense in accordance with FASB ASC Topic 718 and values the equity securities based on the fair value of the security on the date of grant. Stock option awards are valued using the Black-Scholes option-pricing model.
The Company accounts for stock issued to non-employees where the value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity instruments is complete.
As there is no trading history and the Company securities are not offered to the public, the Company has determined that the fair value of its stock is the price paid when it raises funds. For the seven months ended July 31, 2010 the Company issued 50,000 common stock shares for consulting services valued at $5,000. For the period February 25, 2008 (inception) through December 31, 2009, the Company issued 4,500,000 common shares to consultants for services valued at $67,500 and 9,765,000 shares to the Company’s founders for services valued at $146,475, or $.015 per share. The value of these shares totaling 14,265,000 and $213,975, was determined by the Company’s Board of Directors since at the time of issuance, the Company had no operations, business plan, website or software.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Recent Accounting Pronouncements
In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” (“SFAS 166”), codified as FASB ASC 860, which requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. FASB ASC 860 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. FASB ASC 860 is effective for fiscal years beginning after November 15, 2009. The adoption of FASB ASC 860 did not have an impact on the Company’s financial condition, results of operations or cash flows.
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In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), codified as FASB ASC 810-10, which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. FASB ASC 810-10 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. FASB ASC 810-10 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. FASB ASC 810-10 also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. FASB ASC 810-10 is effective for fiscal years beginning after November 15, 2009. The adoption of FASB ASC 810-10 did not have an impact on the Company’s financial condition, results of operations or cash flows.
In June 2009, the FASB issued FASB ASC 105, Generally Accepted Accounting Principles, which establishes the FASB Accounting Standards Codification as the sole source of authoritative generally accepted accounting principles. Pursuant to the provisions of FASB ASC 105, the Company has updated references to GAAP in these financial statements. The adoption of FASB ASC 105 did not impact the Company’s financial position or results of operations.
NOTE 2 – STOCKHOLDERS’ DEFICIT
Common Stock
The Company has 100,000,000 shares of $.001 par value Common stock authorized at July 31, 2010. There were 15,800,040 and 14,515,000 shares outstanding at July 31, 2010 and December 31, 2009, respectively.
During the seven months ended July 31, 2010 the Company issued 1,285,000 shares of common stock for cash proceeds of $124,117 and for services rendered in the amount of $5,000..
NOTE 3 – COMMITMENTS
The Company rents office space for its main office in Eagan, Minnesota on a month-to-month basis. Monthly rent for this space is $600.
NOTE 4 – RELATED PARTY TRANSACTIONS
Related Party Loans Payable
The following is a summary of related party loans payable:
|
July 31,
2010
|
December 31, 2009
|
||||
|
Liabilities
|
|||||
|
Due to related parties
|
|
5,524
|
5,524
|
||
|
Notes payable to related parties
|
|
--
|
6,400
|
Note Payable to Related Parties
On May 17, 2008, the Company entered into a promissory note with an officer of the Company in the amount of $6,400. The promissory note represents the value of software development costs advanced to the Company during May and June, 2008. The note accrues interest at 10% and is due on demand. During the seven months ended July 31, 2010 the Company repaid a total of $6,400 on the note leaving a balance of $-0-. Accrued interest totaled $193 and $1,027 as of July 31, 2010 and December 31, 2009, respectively.
Due to Related Parties
During 2009, an officer of the Company advanced to the Company $5,524 in the form of expenses incurred on behalf of the Company. The balance was $5,524 at July 31, 2010 and December 31, 2009 respectively.
Officers Compensation Expense totaled $24,375 for the seven months ended July 31, 2010.
-42-
NOTE 5 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the company will continue as a going concern. The Company has not achieved profitability and has not enacted its entire business plan as of July 31, 2010 and has not achieved profitability. This raises substantial doubt about the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.
The Company’s activities to date have been supported by related party debt and equity financing. It has sustained losses in all previous reporting periods with an inception to date loss of $345,769. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan.
NOTE 6 – INCOME TAXES
At December 31, 2009, the Company had available federal and state net operating loss carryforwards to reduce future taxable income. The amount available was approximately $345,500 for federal and state purposes. The federal and state net operating loss carryforwards begin to expire in 2028. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the net operating loss carryforwards. Accordingly, the Company has not recognized a 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 carryforwards, the utilization of the Company’s net operating loss carryforwards 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 carryforwards and will recognize a deferred tax asset at that time.
Significant components of the Company’s deferred income tax assets are as follows as of:
|
Deferred income tax asset:
|
December 31,
2009
|
||||
|
Net operating loss carry forward
|
$ | 345,000 | |||
|
Valuation allowance
|
(345,000 | ) | |||
|
Net deferred income tax asset
|
— | ||||
The Company has adopted FASB ASC Topic 740 – Income Taxes (formerly FIN 48) — an interpretation of former FASB Statement No. 109. The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this ASC Topic we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This ASC Topic also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2009, the Company does not have a liability for unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for five years after 2008. 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 7 – SUBSEQUENT EVENTS
In 2009, the FASB ASC Topic 865 (formerly FASB 165, Subsequent Events) , which defines the period after the balance sheet date that subsequent events should be evaluated and provides guidance in determining if the event should be reflected in the current financial statements. This ASC Topic also requires disclosure regarding the date through which subsequent events have been evaluated. The Company adopted the provisions of Statement 165 as of December 31, 2009.
The Company has evaluated subsequent events through the time the July 31, 2010 financial statements were issued on September 24, 2010. No events have occurred subsequent to July 31, 2010 that require disclosure or recognition in these financial statements other than as listed below.
-43-
ADVANCED CREDIT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 25, 2008 (INCEPTION)
THROUGH DECEMBER 31, 2009
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Stan J.H. Lee, CPA
2160 North Central Rd. Sutie 203 tFort Lee t NJ 07024
P.O. Box 436402 t San Ysidro t CA 92143-9402
619-623-7799 t Fax 619-564-3408 t E-mail) stan2u@gmail.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Advanced Credit Technologies, Inc.
We have audited the accompanying balance sheets of Advanced Credit Technologies, Inc. (the “Company”) (a development stage enterprise) as of December 31, 2009 and December 31, 2008, and the related statements of operations, stockholders’ deficit and cash flows for the year ended December 31, 2009 and for the period February 25, 2008 (inception) through December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Advanced Credit Technologies, Inc. as of December 31, 2009 and December 31, 2008, and the results of its operations and its cash flows for the year ended December 31, 2009 and for the period February 25, 2008 (inception) through December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company would continue as a going concern. As discussed in Note 5 to the financial statements, the Company has not generated profits to date and has a working capital deficit which raises substantial doubt as to its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Stan J.H. Lee, CPA
_____________________
_____________________
Stan J.H. Lee, CPA
June 5, 2010
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|
Advanced Credit Technologies, Inc.
|
||||||||
|
(A development stage enterprise)
|
||||||||
|
Balance Sheets
|
||||||||
|
December 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Assets
|
||||||||
|
Current assets
|
||||||||
|
Cash in bank
|
$ | 9,626 | $ | 10 | ||||
|
Total assets
|
9,626 | 10 | ||||||
|
Liabilities and stockholders' deficit
|
||||||||
|
Current liabilities
|
||||||||
|
Accrued expenses
|
6,000 | 3,000 | ||||||
|
Notes payable - Related parties
|
6,400 | 6,400 | ||||||
|
Accrued interest
|
1,027 | 387 | ||||||
|
Due to related parties
|
5,524 | -- | ||||||
|
Total liabilities
|
18,951 | 9,787 | ||||||
|
Stockholders' deficit
|
||||||||
|
Common stock 100,000,000, $.001 par value shares
|
||||||||
|
authorized, 14,515,000 and 14,265,000 issued
|
||||||||
|
and outstanding
|
14,515 | 14,265 | ||||||
|
Additional paid-in capital
|
224,660 | 199,910 | ||||||
|
Deficit accumulated during the development stage
|
(248,500 | ) | (223,952 | ) | ||||
|
Total stockholders' deficit
|
(9,325 | ) | (9,777 | ) | ||||
|
Total liabilities and stockholders' deficit
|
$ | 9,626 | $ | 10 | ||||
See accompanying notes to financial statements
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|
Advanced Credit Technologies, Inc.
|
||||||||||||
|
(A development stage enterprise)
|
||||||||||||
|
Statements of Operations
|
||||||||||||
|
February 25, 2008
|
February 25, 2008
|
|||||||||||
|
(Inception)
|
(Inception)
|
|||||||||||
|
Year Ended
|
through
|
through
|
||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Revenues
|
$ | 64,554 | $ | 1,055 | $ | 65,609 | ||||||
|
Commissions paid
|
44,360 | -- | 44,360 | |||||||||
|
Gross margin
|
20,194 | 1,055 | 21,249 | |||||||||
|
Operating expenses
|
||||||||||||
|
Professional fee
|
3,000 | 3,000 | 6,000 | |||||||||
|
Consulting fees
|
- | 213,975 | 213,975 | |||||||||
|
Travel and entertainment
|
19,608 | 40 | 19,648 | |||||||||
|
Research and development
|
11,500 | 6,400 | 17,900 | |||||||||
|
Other operating expenses
|
9,994 | 1,205 | 11,199 | |||||||||
|
Total operating expenses
|
44,102 | 224,620 | 268,722 | |||||||||
|
Loss from operations
|
(23,908 | ) | (223,565 | ) | (247,473 | ) | ||||||
|
Interest expense
|
640 | 387 | 1,027 | |||||||||
|
Net loss
|
$ | (24,548 | ) | $ | (223,952 | ) | $ | (248,500 | ) | |||
|
Earnings per share
|
$ | (0.00 | ) | $ | (0.06 | ) | ||||||
|
Weighted average shares outstanding
|
14,280,753 | 4,064,548 | ||||||||||
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|
Advanced Credit Technologies, Inc.
|
||||||||||||||||||||
|
(a development stage enterprise)
|
||||||||||||||||||||
|
Statements of Stockholders' Deficit
|
||||||||||||||||||||
|
Deficit
|
||||||||||||||||||||
|
Accurmulated
|
||||||||||||||||||||
|
Additional
|
During
|
|||||||||||||||||||
|
Common stock
|
Paid-In
|
Development
|
||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
||||||||||||||||
|
Balance, February 25, 2008
|
-- | $ | -- | $ | -- | $ | -- | $ | -- | |||||||||||
|
Proceeds from issuance of
|
||||||||||||||||||||
|
Capital contributed by founders
|
-- | -- | 200 | -- | 200 | |||||||||||||||
|
Stock issued for consulting
|
14,265,000 | 14,265 | 199,710 | -- | 213,975 | |||||||||||||||
|
Net loss for the period from
|
||||||||||||||||||||
|
February 25, 2008 (inception)
|
||||||||||||||||||||
|
through December 31, 2008
|
-- | -- | -- | (223,952 | ) | (223,952 | ) | |||||||||||||
|
Balance, December 31, 2008
|
14,265,000 | 14,265 | 199,910 | (223,952 | ) | (9,777 | ) | |||||||||||||
|
Proceeds from issuance of
|
||||||||||||||||||||
|
common stock
|
250,000 | 250 | 24,750 | -- | 25,000 | |||||||||||||||
|
Net loss for the year ended
|
||||||||||||||||||||
|
December 31, 2009
|
-- | -- | -- | (24,548 | ) | (24,548 | ) | |||||||||||||
|
Balance, December 31, 2009
|
14,515,000 | $ | 14,515 | $ | 224,660 | $ | (248,500 | ) | $ | (9,325 | ) | |||||||||
-48-
|
Advanced Credit Technologies, Inc.
|
||||||||||||
|
(A development stage enterprise)
|
||||||||||||
|
Statements of Cash Flows
|
||||||||||||
|
February 25, 2008
|
February 25, 2008
|
|||||||||||
|
(Inception)
|
(Inception)
|
|||||||||||
|
Year Ended
|
through
|
through
|
||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
Cash flows used by operating activities:
|
||||||||||||
|
Net loss
|
$ | (24,548 | ) | $ | (223,952 | ) | $ | (248,500 | ) | |||
|
Adjustments to reconcile net loss to
|
||||||||||||
|
net cash provided by operations
|
||||||||||||
|
Stock issued for consulting services
|
-- | 213,975 | 213,975 | |||||||||
|
Changes in liabilities
|
3,000 | 3,000 | 6,000 | |||||||||
|
Accrued interest
|
640 | 387 | 1,027 | |||||||||
|
Net cash provided by operations
|
(20,908 | ) | (6,590 | ) | (27,498 | ) | ||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Proceeds from common stock issuance
|
25,000 | 200 | 25,200 | |||||||||
|
Proceeds from related party loans
|
5,524 | 6,400 | 11,924 | |||||||||
|
Cash flows from financing activities
|
30,524 | 6,600 | 37,124 | |||||||||
|
Increase in cash
|
9,616 | 10 | 9,626 | |||||||||
|
Cash - Beginning
|
10 | -- | -- | |||||||||
|
Cash - Ending
|
$ | 9,626 | $ | 10 | $ | 9,626 | ||||||
See accompanying notes to financial statements
-49-
ADVANCED CREDIT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 25, 2008 (INCEPTION)
THROUGH DECEMBER 31, 2009
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
On February 25, 2008, Advanced Credit Technologies, Inc. (the “Company”) was incorporated in the State of Nevada.
Advanced Credit Technologies, Inc. provides a state of the art credit management platform that is a web based delivery system. Industries that benefit from the Company’s technology include realtors, auto dealers and loan originators.
The Company has limited operations and in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) is considered to be in the development stage.
Basis of Presentation
Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ from the estimates.
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.
Cash and Cash Equivalents
Cash equivalents are comprised of certain highly liquid investments with maturities of three months or less when purchased. The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses related to this concentration of risk. As of December 31, 2009 and 2008, the Company had $0 in deposits in excess of federally-insured limits.
Research and Development, Software Development Costs, and Internal Use Software Development Costs
Research and development costs are charged to operations as incurred.
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 cancelled 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.
-50-
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 year ended December 31, 2009 and for the period February 25, 2008 (inception) through December 31, 2008, we have capitalized external and internal use software and website development costs totaling $-0- and $-0-, respectively. The estimated useful life of costs capitalized is evaluated for each specific project and ranges from one to three years.
Advertising Expenses
Advertising costs are expensed as incurred. The total advertising expenses included in the Statement of Operations for the year ended December 31, 2009 and for the period February 25, 2008 (inception) through December 31, 2008 were $-0- and $-0-, respectively.
Fixed Assets
The Company records its fixed assets at historical cost. The Company expenses maintenance and repairs as incurred. Upon disposition of fixed assets, the gross cost and accumulated depreciation are written off and the difference between the proceeds and the net book value is recorded as a gain or loss on sale of assets. The Company depreciates its fixed assets over their respective estimated useful lives ranging from 3 to 5 years.
Intangible and Long-Lived Assets
The Company follows FASB ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Through December 31, 2009, the Company had not experienced impairment losses on its long-lived assets.
Research and Development
In accordance with ASC Topics 985 and 350 the Company has recorded all costs incurred to establish the technological feasibility of computer software product to be sold, leased, or otherwise marketed are researched and development costs. For the year ended December 31, 2009 and for the period February 25, 2008 (inception) through December 31, 2008 the Company recorded research and development costs of $11,500 and $6,400 respectively.
Revenue Recognition
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed and determinable, and collectability is reasonably assured. Determining whether some or all of these criteria have been met involves assumptions and judgments that can have a significant impact on the timing and amount of revenue the Company reports.
Cost of Revenues
The Company records commissions paid to subcontractors directly involved in the production of revenue as cost of sales.
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.
-51-
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 as of December 31, 2009 and 2008.
Income Taxes
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, 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.
Net 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.
-52-
At December 31, 2009 and December 31, 2008, no potentially dilutive shares were 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.
|
Income (loss)
|
Shares
|
Per Share
|
|||||
|
(Numerator)
|
(Denominator)
|
Amount
|
|||||
|
|
|||||||
|
For the Year Ended December 31, 2009:
|
$
|
(24,548)
|
14,280,753
|
$
|
(0.00)
|
||
|
Basic and diluted EPS
|
|||||||
|
Income to common stockholders
|
|||||||
|
For the period February 25, 2008 (inception) through December 31, 2008:
|
$
|
(223,952)
|
4,064,548
|
$
|
(0.06)
|
||
|
Basic and diluted EPS
|
|||||||
|
Income to common stockholders
|
|||||||
Stock Based Compensation
The Company adopted FASB ASC Topic 718 – Compensation – Stock Compensation (formerly SFAS 123R), which establishes the use of the fair value based method of accounting for stock-based compensation arrangements under which compensation cost is determined using the fair value of stock-based compensation determined as of the date of grant and is recognized over the periods in which the related services are rendered. For stock based compensation the Company recognizes an expense in accordance with FASB ASC Topic 718 and values the equity securities based on the fair value of the security on the date of grant. Stock option awards are valued using the Black-Scholes option-pricing model.
The Company accounts for stock issued to non-employees where the value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity instruments is complete.
As there is no trading history and the Company securities are not offered to the public, the Company has determined that the fair value of its stock is the price paid when it raises funds. For the year ended December 31, 2009 the Company issued no stock for compensation . For the period February 25, 2008 (inception) through December 31, 2008, the Company issued 4,500,000 common shares to consultants for services valued at $67,500 and 9,765,000 shares to the Company’s founders for services valued at $146,475, or $.015 per share. The value of these shares totaling 14,265,000 and $213,975, was determined by the Company’s Board of Directors since at the time of issuance, the Company had no operations, business plan, website or software.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Recent Accounting Pronouncements
In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” (“SFAS 166”), codified as FASB ASC 860, which requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. FASB ASC 860 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. FASB ASC 860 is effective for fiscal years beginning after November 15, 2009. The adoption of FASB ASC 860 did not have an impact on the Company’s financial condition, results of operations or cash flows.
-53-
In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), codified as FASB ASC 810-10, which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. FASB ASC 810-10 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. FASB ASC 810-10 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. FASB ASC 810-10 also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. FASB ASC 810-10 is effective for fiscal years beginning after November 15, 2009. The adoption of FASB ASC 810-10 did not have an impact on the Company’s financial condition, results of operations or cash flows.
In June 2009, the FASB issued FASB ASC 105, Generally Accepted Accounting Principles, which establishes the FASB Accounting Standards Codification as the sole source of authoritative generally accepted accounting principles. Pursuant to the provisions of FASB ASC 105, the Company has updated references to GAAP in these financial statements. The adoption of FASB ASC 105 did not impact the Company’s financial position or results of operations.
NOTE 2 – STOCKHOLDERS’ DEFICIT
Common Stock
The Company has 100,000,000 shares of $.001 par value Common stock authorized at December 31, 2009, and December 31, 2008. There were 14,515,000 and 14,265,000 shares outstanding at December 31, 2009 and 2008, respectively.
NOTE 3 – COMMITMENTS
The Company rents office space for its main office in Eagan, Minnesota on a month-to-month basis. Monthly rent for this space is $600.
The Company entered into an agreement on December 10, 2009 for professional services to improve the technology and features of the Company’s current website (www.700creditmd.com) and to build a solution that will meet the needs of both the Company’s retail customers and its wholesale customers and resellers. The term of the agreement is expected to be approximately three months. The total costs per the agreement is $46,000 due as follows:
|
Paid upon signing of the agreement
|
$ | 11,500. | ||
|
Due upon completion of user functionality
|
5,000 | |||
|
Due upon completion of administrative functionality
|
6,500 | |||
|
Due upon completion of user acceptance testing and
|
||||
|
final rollout of the product
|
23,000 | |||
The Company and the contractor may, within 60 days upon signing of the contract, negotiate an equity participation in lieu of the last $23,000 cash payment.
NOTE 4 – RELATED PARTY TRANSACTIONS
Related Party Loans Payable
The following is a summary of related party loans payable:
|
December 31, 2009
|
December 31, 2008
|
|||||||
|
Liabilities
|
||||||||
|
Due to related parties
|
5,524 | - | ||||||
|
Notes payable to related parties
|
6,400. | 6,400 | ||||||
-54-
Note Payable to Related Parties
On May 17, 2008, the Company entered into a promissory note with an officer of the Company in the amount of $6,400. The promissory note represents the value of software development costs advanced to the Company during May and June, 2008. The note accrues interest at 10% and is due on demand. The note remains unpaid as of December 31, 2009. The balance on the note was $6,400 and $6,400 as of December 31, 2009 and 2008, respectively. Accrued interest totaled $1,027 and $387 as of December 31, 2009 and 2008, respectively.
Due to Related Parties
During 2009, an officer of the Company advanced to the Company $5,524 in the form of expenses incurred on behalf of the Company. The balance was $5,524 at December 31, 2009.
Officers Compensation Expense: Our financial statements reflect consulting fees paid to our founders and officers in the amount of $146,47. See Stock Based Compensation in Note 1.
NOTE 5 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the company will continue as a going concern. The Company has not achieved profitability and has not enacted its entire business plan as of December 31, 2009. In addition, the Company has a working capital deficit in the amount of $9,325. This raises substantial doubt about the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.
The Company’s activities to date have been supported by related party debt and equity financing. It has sustained losses in all previous reporting periods with an inception to date loss of $248,500. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan.
NOTE 6 – INCOME TAXES
At December 31, 2009, the Company had available federal and state net operating loss carryforwards to reduce future taxable income. The amount available was approximately $28,000 for federal and state purposes. The federal and state net operating loss carryforwards begin to expire in 2028. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the net operating loss carryforwards. Accordingly, the Company has not recognized a 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 carryforwards, the utilization of the Company’s net operating loss carryforwards 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 carryforwards and will recognize a deferred tax asset at that time.
Significant components of the Company’s deferred income tax assets are as follows as of:
|
Deferred income tax asset:
|
December 31,
2009
|
||||
|
Net operating loss carry forward
|
$ | 248,500 | |||
|
Valuation allowance
|
(248,500 | ) | |||
|
Net deferred income tax asset
|
— | ||||
-55-
The Company has adopted FASB ASC Topic 740 – Income Taxes (formerly FIN 48) — an interpretation of former FASB Statement No. 109. The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this ASC Topic we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This ASC Topic also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2009, the Company does not have a liability for unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for five years after 2008. 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 7 – SUBSEQUENT EVENTS
In 2009, the FASB ASC Topic 865 (formerly FASB 165, Subsequent Events) , which defines the period after the balance sheet date that subsequent events should be evaluated and provides guidance in determining if the event should be reflected in the current financial statements. This ASC Topic also requires disclosure regarding the date through which subsequent events have been evaluated. The Company adopted the provisions of Statement 165 as of December 31, 2009.
The Company has evaluated subsequent events through the time the December 31, 2009 financial statements were issued on June 5, 2010. No events have occurred subsequent to December 31, 2009 that require disclosure or recognition in these financial statements other than as listed below.
Subsequent to December 31, 2009 the Company received proceeds of $48,500 from the issuance of 485,000 shares of common stock.
-56-
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Advanced Credit Technologies, Inc. Bylaws provide for the indemnification of a present or former director or officer. ACT indemnifies any director, officer, employee or agent who is successful on the merits or otherwise in defense on any action or suit. Such indemnification shall include, but not necessarily be limited to, expenses, including attorney’s fees actually or reasonably incurred by him. Texas law also provides for discretionary indemnification for each person who serves as or at ACT request as an officer or director. ACT may indemnify such individual against all costs, expenses and liabilities incurred in a threatened, pending or completed action, suit or proceeding brought because such individual is a director or officer. Such individual must have conducted himself in good faith and reasonably believed that his conduct was in, or not opposed to, ACT’s best interests. In a criminal action, he must not have had a reasonable cause to believe his conduct was unlawful.
Nevada Law
Pursuant to the provisions of the Nevada Statutes, the Company shall have power to indemnify any person who was or is a party to any proceeding (other than an action by, or in the right of, the corporation), by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against liability incurred in connection with such proceeding, including any appeal thereof, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the corporation or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
A corporation shall have power to indemnify any person, who was or is a party to any proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses and amounts paid in settlement not exceeding, in the judgment of the board of directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal thereof. Such indemnification shall be authorized if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification shall be made under this subsection in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable unless, and only to the extent that, the court in which such proceeding was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by ACT in connection with the sale of the common stock being registered. ACT has agreed to pay all costs and expenses in connection with this offering of common stock. The estimated expenses of issuance and distribution, assuming the maximum proceeds are raised, are set forth below.
|
Legal and Accounting
|
$ | 22,500 | ||
|
SEC EDGAR Filing
|
$ | 1,500 | ||
|
Transfer Agent
|
$ | 1,000 | ||
|
Total
|
$ | 25,000 |
RECENT SALES OF UNREGISTERED SECURITIES
During the past year, Advanced Credit Technologies, Inc. issued the following unregistered securities in private transactions without registering the securities under the Securities Act:
The Company has issued ___6,602,000_________ shares of its common stock in private transactions for total consideration of $__166,000 and certain services provided on behalf of the company.________. The Company believes that the issuance was exempt from registration pursuant to Section 4(2) and Rule 504 of Regulation D of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering.
-57-
INDEX OF EXHIBITS
|
Exhibit
|
Description
|
|
|
3.1
|
Certificate of Formation of Limited Liability Company filed on February 26, 2007
|
|
|
3.1.1
|
Certificate of Conversion and Certificate of Formation For-Profit Corporation filed on July 13, 2010
|
|
|
3.2
|
By-laws adopted on July 13, 2010
|
|
|
4.1
|
Specimen Common Stock Certificate
|
|
|
5.1
|
Opinion of W. Manly, P.A.
|
|
|
10.1
|
Employment Agreement with Chris Jackson, dated March 1, 2008
|
|
|
10.2
|
Employment Agreement with Enrico Giordano, dated March 1, 2008
|
|
| 10.3 | Contata Marketing Agreement | |
|
23.1
|
Consent of Stan J.H. Lee, CPA, P.A.
|
|
|
23.2
|
Consent of W. Manly, P.A. (see exhibit 5.1)
|
UNDERTAKINGS
The registrant hereby undertakes:
To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:
|
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;
|
|
(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement;
|
|
(iii) Include any additional or changed material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
|
For determining liability under the Securities Act, to treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a Director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
For determining any liability under the Securities Act, to treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1), or (4) or 497(h) under the Securities Act as part of this registration statement as of the time the Commission declared it effective.
-58-
For determining any liability under the Securities Act, to treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities.
For determining liability of the undersigned registrant under the Securities Act to purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(iv) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
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(v) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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(vi) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
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(vii) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S-1 and authorized this Registration Statement to be signed on its behalf by the undersigned, in the City of Eagan State of Minnesota on October 19, 2010
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ADVANCED CREDIT TECHNOLOGIES, INC.
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By:
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/s/ Chris Jackson | ||
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Chris Jackson
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President and Chief Operating Officer
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In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities stated on __October 19,____________, 2010:
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Signature
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Title
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/s/ Chris Jackson
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Principal Executive Officer,
Principal Financial Officer,
Principal Accounting Officer and Director
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Chris Jackson
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/s/ Enrico Giordano
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Title
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Enrico Giordano
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BACK COVER
Dealer Prospectus Delivery Obligation
Prior to the expiration of 90 days after the effective date of this registration statement or prior to the expiration of 90 days after the first date upon which the security was bona fide offered to the public after such effective date, whichever is later, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
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