UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For quarterly period ended July 31, 2015

 

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

 

For the transition period from ___________ to___________

 

Commission file number 333-186732

 

ARTEC GLOBAL MEDIA, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		99-0381772
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
1000 E William St Suite 204 Carson City, NV 89701
Carson City, NV		89701
(Address of principal executive offices)		(Zip Code)

 

(844) 505-2285

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $0.001 Par Value

(Title of Class)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

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

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act). Yes o No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 10,255,626 shares of common stock, par value $0.001, were outstanding on September 2, 2015. The registrant’s common stock is listed under the symbol “ACTL”.

 

Transitional Small Business Disclosure Format Yes ¨ No x

 

 

 

ARTEC GLOBAL MEDIA, INC.

FORM 10-Q

 

For the Quarterly Period Ended July 31, 2015

 

Table of Contents

 

PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Balance Sheets			1
	Statements of Operations			2
	Statements of Stockholders’ Equity (Deficit)			3
	Statements of Cash Flows			4
	Notes to Financial Statements			5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations			12
Item 4.	Controls and Procedures			19
PART II OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			20
Item 6.	Exhibits			21
Signatures				22
Certifications

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

 

Artec Global Media, Inc.
Balance Sheets

---

 

		July 31,				January 31,
		2015				2015
		(Unaudited)				(Audited)
Assets
Current Assets
Cash		$	7,193			$	56,745
Accounts receivable			2,774				15,674
Prepaid expenses			-				10,000
Total current assets			9,967				82,419
Total assets		$	9,967			$	82,419
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable & accrued expenses		$	18,623			$	36,799
Shareholder loans			1,087				1,387
Interest payable			5,494				1,174
Convertible notes - net of discount of $124,822 and $73,437			165,542				89,313
Total Current Liabilities			190,746				128,673
Long-term Liabilities:
Convertible notes - net of discount of $58,948 and $142,322			31,858				22,956
Interest payable			8,000				4,667
Total long-term liabilities			39,858				27,623
Total liabilities			230,604				156,296
Commitments and contingencies
Stockholders' Equity
Common stock, $0.001 par value 75,000,000 shares authorized; issued and outstanding 9,776,631 and 9,250,255 at July 31, 2015 and January 31, 2015, respectively.			9,777				9,250
Additional-paid-in-capital			1,486,771				1,294,395
Accumulated deficit			(1,717,185	)			(1,377,522	)
Total stockholders' equity (deficit)			(220,637	)			(73,877	)
Total liabilities and stockholders' equity (deficit)		$	9,967			$	82,419

 

(The accompanying notes are an integral part of these financial statements)

 

1

 

Artec Global Media, Inc.
Statements of Operations (Unaudited)
For the Three and Six Months Ended April 30, 2015 and 2014

---

 

		Three Months Ended July 31,								Six Months Ended July 31,
		2015				2014				2015				2014
Revenue		$	61,224			$	64,670			$	197,477			$	83,338
Cost of sales			26,673				48,638				70,866				64,221
Gross profit			34,551				16,032				126,611				19,117
Operating expenses
Selling, general and administrative			114,263				233,849				342,937				389,043
Loss from operations			(79,712	)			(217,817	)			(216,326	)			(369,926	)
Other income (expense)
Interest expense			(13,534	)			-				(20,451	)			-
Interest expense - accretion of debt discount			(58,363	)			-				(102,886	)			-
Total income (expense)			(71,897	)			-				(123,337	)			-
Net loss		$	(151,609	)		$	(217,817	)		$	(339,663	)		$	(369,926	)
Basic Loss per Common Share		$	(0.02	)		$	(0.03	)		$	(0.04	)		$	(0.04	)
Weighted average number of common shares outstanding - basic			9,502,507				8,290,205				9,392,224				8,290,205

 

(The accompanying notes are an integral part of these financial statements)

 

2

 

Artec Global Media, Inc.
Statement of Stockholders' Equity
For the Six Months Ended July 31, 2015 and Year Ended January 31, 2015

---

 

										Additional				Deferred				Accumulated				Total
		Common Stock								paid-in				Stock				Earnings				Stockholders'
		Shares				Amount				Capital				Compensation				(Deficit)				Equity (Deficit)
Balance, January 31, 2014			8,245,000			$	8,245			$	72,655			$	-			$	(58,893	)		$	22,007
Common stock issued for services			635,000				635				634,365				(400,000	)			0				235,000
Proceeds from sale of common stock			370,255				370				369,885				-				-				370,255
Amortization of deferred stock compensation			-				-				-				400,000				-				400,000
Discount on convertible promissory note due to beneficial conversion feature			-				-				188,323				-				-				188,323
Discount on convertible promissory note due to detachable warrants			-				-				29,167				-				-				29,167
Net loss			-				-				-				-				(1,318,629	)			(1,318,629	)
Balance, January 31, 2015			9,250,255				9,250				1,294,395				-				(1,377,522	)			(73,877	)
Common stock issued for services			25,000				25				6,225				-				-				6,250
Proceeds from sale of common stock			280,000				280				69,720				-				-				70,000
Convertible promissory notes converted to common stock			221,376				222				48,312												48,534
Discount on convertible promissory note due to beneficial conversion feature			-				-				68,119				-				-				68,119
Net loss			-				-				-				-				(339,663	)			(339,663	)
Balance, July 31, 2015 (Unaudited)			9,776,631			$	9,777			$	1,486,771			$	-			$	(1,717,185	)		$	(220,637	)

 

(The accompanying notes are an integral part of these financial statements)

 

3

 

Artec Global Media, Inc.
Statements of Cash Flows (Unaudited)
For the Six Months Ended July 31, 2015 and 2014

---

 

	Six Months Ended July 31,
		2015				2014
Cash flows from operating activities
Net loss		$	(339,663	)		$	(369,926	)
Adjustments to reconcile net loss net cash provided (used) by operating activities:
Common stock issued for services			6,250				100,000
Accretion of debt discount			102,886				-
Legal fees paid in connection with convertible notes			-				-
Changes in assets and liabilities:
Decrease (increase) in accounts receivable			12,900				(27,347	)
Decrease (increase) in prepaid expenses			10,000				17,822
Increase (decrease) in accounts payable and accrued expenses			(18,176	)			32,458
Increase (decrease) in accrued interest			12,551				-
Net cash used in operating activities			(213,252	)			(246,993	)
Cash flows from financing activities
Proceeds from sale of common stock			70,000				320,255
Proceeds from convertible promissory notes			94,000				-
Proceeds from shareholder loans			6,000				-
Repayment of shareholder loans			(6,300	)			-
Net cash provided by financing activities			163,700				320,255
Increase (decrease) in cash			(49,552	)			73,262
Cash and cash equivalents at beginning of period			56,745				5,285
Cash and cash equivalents at end of period		$	7,193			$	78,547
Supplemental disclosures of cash flow information
Cash paid during the year for:
Taxes paid		$	-			$	-
Interest paid		$	-			$	-
Non-cash financing activities:
Value of common stock issued for services		$	6,250			$	100,000
Common stock issued for conversion of convertible promissory notes		$	48,534			$	-
Debt discount recorded for beneficial conversion feature		$	68,119			$	-

 

(The accompanying notes are an integral part of these financial statements)

 

4

 

Artec Global Media, Inc.

NOTES TO FINANCIAL STATEMENTS

 

Basis of Presentation

 

The unaudited financial statements of Artec Global Media, Inc. as of July 31, 2015, and for the three and six months ended July 31, 2015 and 2014, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended January 31, 2015, as filed with the Securities and Exchange Commission as part of the Company's Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

 

NOTE 1 – Organization, Recent Accounting Pronouncements, Going Concern and Concentrations of Credit Risk

 

Organization

 

Artec Global Media, Inc. (the “Company,” “we,” “us,” “our”) was incorporated under the laws of the State of Nevada on August 6, 2012 (“Inception”) originally intending to commence operations in the business of distributing crystal white glass floor tile. The Company was in the development stage until January 2013 when the Company changed its focus to providing online marketing and reporting solutions to companies and began generating revenue. Thus, beginning in the quarter ending April 30, 2014, the Company left the development stage. On June 30, 2014 the Company changed its name from Artec Consulting Corp. to Artec Global Media, Inc. to more accurately align our corporate name with our current business activities.

 

Recent Accounting Pronouncements

 

In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis”, which amends the consolidation requirements in ASC 810 and significantly changes the consolidation analysis required under U.S. GAAP relating to whether or not to consolidate certain legal entities. Early adoption is permitted. The Company’s effective date for adoption is January 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.

 

In January 2015, the FASB issued ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”, which eliminates the concept the concept of an extraordinary item from U.S. GAAP. Under the ASU, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. Early adoption is permitted. The Company’s effective date for adoption is January 1, 2016. The Company does not expect this accounting update to have a material effect on its consolidated financial statements in future periods, although that could change.

 

We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.

 

5

 

Going Concern

 

The Company has not generated net income since inception. The Company has an accumulated deficit of $1,717,185 as of July 31, 2015, and does not have positive cash flows from operating activities. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern, which is dependent upon the Company’s ability to establish itself as a profitable business.

 

In its report with respect to the Company’s financial statements for the year ended January 31, 2015, the Company’s independent auditors expressed substantial doubt about the Company’s ability to continue as a going concern. Because the Company has not yet generated net income from its operations, its ability to continue as a going concern is wholly dependent upon its ability to obtain additional financing and increase revenue.

 

As of July 31, 2015, the Company had cash and cash equivalents of $7,193 and accounts receivable of $2,774. Based upon its current and near term anticipated level of operations and expenditures, the Company's cash on hand is insufficient to enable it to continue operations for the next twelve months. As a result, the Company is seeking additional financing but has no commitments to obtain any such financing, and there can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all. If adequate funds are not available on reasonable terms, or at all, it would result in a material adverse effect on the Company’s business, operating results, financial condition and prospects.

 

Concentrations of credit risk

 

At July 31, 2015, two customers accounted for 82% (44% and 38%) of accounts receivable.

 

During the three months ended July 31, 2015, three customers accounted for 87% (43%, 31% and 13%) of sales. During the six months ended July 31, 2015, three customers accounted for 91% (48%, 32% and 11%) of sales.

 

NOTE 2 – Accounts Receivable

 

Accounts receivable are reported at the customers' outstanding balances. The Company does not have a history of significant bad debt and has not recorded any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve.

 

Revenue is generated from advertising and marketing services, the sale of marketing data and from student loan borrower services. Firms engage our advertising solutions whereby the Company markets products through our online portal http://artecmedia.com and other 3rd party portals. Clients pay us for leads that they can convert into customers. Typically, leads are routed through a call center or other offline customer acquisition process. Online leads are usually generated as clicks from websites or email. The two revenue options the Company has promoted are pay-per-lead and pay-per-sale. Revenue from the pay-per-lead option ranges from $4 to $6 per verified lead and the pay-per-sale option revenue range is from $80-$120. Customer payment terms range from net 7 to net 30 days.

 

The Company generates revenue through the sale of data used by companies in the targeted marketing of their products and services via direct mail. Payment for our data is either upfront or via a revenue sharing arrangement whereby the Company is paid monthly based on the customers acquired through the direct mail process.

 

The Company also earns contracted fees from student loan borrowers in exchange for providing services designed to assist the borrower in managing their student loans and enroll in qualifying programs that ease their financial burden. The borrower and the Company enter into a contract under which the Company is required to fulfill a specific goal only after which the Company is able to collect its fee. Collection is typically within a few days or up to three months depending on arrangements made with the client.

 

Revenue is recognized only when persuasive evidence of an arrangement exists, the fee is fixed or determinable, the product or service has been delivered, and collectability of the resulting receivable is probable.

 

6

 

NOTE 3 – Convertible Promissory Notes

 

LG Capital Funding Convertible Notes

 

On October 30, 2014, Artec and LG Capital Funding, LLC ("LG Capital") entered into a Securities Purchase Agreement (the "LG SPA"). Under the LG SPA, LG Capital will provide $165,375 in three equal payments of $55,125 and evidenced by a convertible promissory note on each of October 31, 2014, January 29, 2015 and a date to be determined. On October 31, 2014, Artec received $50,000 net of $5,125 ($2,500 legal fees and $2,625 OID) and issued a convertible promissory note (the “LG Note 1”) in the amount of $55,125. On January 30, 2015, Artec received $50,000 net of $5,125 ($2,500 legal fees and $2,625 OID) and issued a convertible promissory note (the “LG Note 2”) in the amount of $55,125. The LG Note 1 and LG Note 2 (collectively the “LG Notes”) mature in one year on October 30, 2015 and January 30, 2016, respectively, accrue interest of 8% and are convertible into shares of common stock any time 180 days after the date of each LG Note at a conversion price equal to 65% of the lowest closing bid price as quoted on a national exchange for ten prior trading days including the date on which the Notice of Conversion is received by Artec. In no event shall LG Capital effect a conversion if such conversion results in LG Capital beneficially owning in excess of 9.9% of the outstanding common stock of the Company. Accrued interest shall be paid in shares of common stock at any time at the discretion of the LG Capital pursuant to the conversion terms above. The Note may be prepaid with the following penalties: (i) if the Note is prepaid within 90 days of the issuance date, then 115% of the face amount plus any accrued interest; (ii) if the Note is prepaid within 91 -180 days of the issuance date, then 135% of the face amount plus any accrued interest. The Note may not be prepaid after the 180^th day.

 

The debt discounts attributable to the fair value of the beneficial conversion feature amounted to $29,681 and $30,252 for LG Note 1 and LG Note 2, respectively, and are being accreted over the term of the LG Notes. The Company recognized $2,151 of interest expense related to the LG Notes and $15,106 of debt discount accretion related to the LG Notes during the three months ended July 31, 2015. The Company recognized $4,301 of interest expense related to the LG Notes and $29,720 of debt discount accretion related to the LG Notes during the six months ended July 31, 2015.

 

During the three months ended July 31, 2015, LG Capital converted $5,355 into 13,731 shares of common stock.

 

JMJ Financial Convertible Note

 

On November 12, 2014, Artec and JMJ Financial entered into a $250,000 Convertible Promissory Note (the "JMJ Note"). Under the JMJ Note, JMJ Financial will advance various amounts up to $250,000 in in their sole discresion. Each advance matures two years from the date of advance (the “JMJ Maturity Date”) and carries the following terms: (i) no interest for the first 90 days with a one-time 12% charge on the 90^th day outstanding; (ii) each advance may be repaid within 90 days after which Artec may not make further payments prior to the JMJ Note Maturity Date; (iii) each advance includes a 10% original issue discount. JMJ Financial may convert at their discresion any or all of the outstanding principle and interest at any time from the date of each advance into shares of common stock at a conversion price equal to 60% of the lowest trade price in the 25 trading days previous to the conversion. Unless otherwise agreed in writing by both parties, at no time will JMJ Financial convert any amount of the JMJ Note into common stock that would result in the JMJ Financial owning more than 4.99% of the common stock outstanding. Artec receved $35,000 pursuant to the JMJ Note (“JMJ Note 1”) on November 12, 2014 and recorded a debt discount of $25,926 attributable to the fair value of the beneficial conversion feature. Artec receved $25,000 pursuant to the JMJ Note (“JMJ Note 2”) (collectively the “JMJ Notes”) on April 28, 2015 and recorded a debt discount of $18,519 attributable to the fair value of the beneficial conversion feature. The debt discounts are being accreted over the term of the JMJ Notes.

 

The Company recognized $3,333 of interest expense related to the JMJ Note 2 and $5,601 of debt discount accretion related to the JMJ Notes during the three months ended July 31, 2015. The Company recognized $8,000 of interest expense related to the JMJ Note 1 and JMJ Note 2 and $8,813 of debt discount accretion related to the JMJ Notes during the six months ended July 31, 2015.

 

During the three months ended July 31, 2015, JMJ converted $19,917 into 64,500 shares of common stock.

 

7

 

Adar Bays Convertible Note

 

On October 30, 2014, Artec and Adar Bays, LLC ("Adar") entered into a Securities Purchase Agreement (the "Adar SPA"). Under the Adar SPA, Adar will provide $105,000 in two equal payments of $52,500 and evidenced by a convertible promissory note. On October 31, 2014, Artec received $47,500 net of $5,000 ($2,500 legal fees and $2,500 OID) and issued a convertible promissory note (the “Adar Note”) in the amount of $52,500. The Adar Note accrues interest of 8%, matures on October 31, 2015 and is convertible into shares of common stock any time 180 days after October 30, 2014, beginning on April 28, 2015 at a conversion price equal to 65% of the lowest closing bid price as quoted on a national exchange for ten prior trading days including the date on which the Notice of Conversion is received by Artec. In no event shall Adar effect a conversion if such conversion results in Adar beneficially owning in excess of 9.9% of the outstanding common stock of the Company. Accrued interest shall be paid in shares of common stock at any time at the discretion of Adar pursuant to the conversion terms above. The Adar Note may not be prepaid.

 

Additionally, Adar issued to the Company a note for $50,000, bearing interest at the rate of 8% per annum maturing on July 1, 2015 (the “Adar Investor Note”). The Adar Investor Note may be prepaid, without penalty, all or portion of the outstanding balance along with accrued but unpaid interest at any time prior to maturity.

 

The debt discount attributable to the fair value of the beneficial conversion feature amounted to $28,270 for the Adar Note and is being accreted over the term of the Adar Note. The Company recognized $150 of net interest expense and $7,126 of debt discount accretion related to the Adar Note and Adar Investor Note during the three months ended July, 31, 2015. The Company recognized $249 of net interest expense and $14,019 of debt discount accretion related to the Adar Note and Adar Investor Note during the six months ended July, 31, 2015.

 

Vista Capital Investments Convertible Note

 

On December 4, 2014, Artec and Vista Capital Investments, LLC (“Vista”) entered into a Securities Purchase Agreement (the "Vista SPA"), for the sale of a 12% convertible note in the principal amount of $250,000 (which includes a $25,000 original issue discount) (the “Vista Note”) of which Vista funded $35,000 upon closing. Additional consideration, up to the principle amount, is payable to Artec at the discretion of Vista. We have no obligation to pay Vista any amounts on the unfunded portion of the Vista Note. The Vista Note bears a one-time interest charge of 12% on the date consideration is received. All interest and principal must be repaid two years from the date consideration is received. The Vista Note is convertible into common stock, at Vista’s option, at 60% of the lowest trade occurring during the twenty five (25) consecutive trading days immediately preceding the conversion date. In the event the Company elects to prepay all or any portion of the Vista Note within 90 days of the issuance date, the Company is required to pay to Vista an amount in cash equal to 145% multiplied by the sum of all principal, interest and any other amounts owing. Unless otherwise agreed in writing by both parties, at no time will Vista convert any amount of the Vista Note into common stock that would result in the Vista owning more than 4.99% of the common stock outstanding.

 

The debt discount attributable to the fair value of the beneficial conversion feature amounted to $38,889 for the Vista Note and is being accreted over the term of the Vista Note. The Company recognized no interest expense related to the Vista Note during the three and six months ended July 31, 2015. The Company recorded $4,901 and $9,642 of debt discount accretion during the three and six months ended July 31, 2015.

 

Typenex Financing

 

On January 7, 2015 (the “Effective Date”) Artec entered into a Securities Purchase Agreement with Typenex Co-Investment, LLC ("Typenex"), for the sale of a 10% convertible note in the principal amount of $225,000 (which includes Typenex legal expenses in the amount of $5,000 and a $20,000 original issue discount) (the “Typenex Note”) of which Typenex funded $75,000 upon closing. We have no obligation to pay Typenex any amounts on the unfunded portion of the Typenex Note. Additionally, Typenex issued to the Company three notes, aggregating $125,000, bearing interest at the rate of 8% per annum with each note maturing seventeen months from January 7, 2015 (the “Typenex Investor Notes”). The Typenex Investor Notes may be prepaid, without penalty, all or portion of the outstanding balance along with accrued but unpaid interest at any time prior to maturity.

 

8

 

The Typenex Note bears interest at the rate of 10% per annum. All interest and principal must be repaid on June 7, 2016. The Typenex Note is convertible into common stock, at Typenex’s option, at the lesser of (i) $5.00, and (ii) 70% (the “Conversion Factor”) of the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable Conversion, provided that if at any time the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding any date of measurement is below $2.50, then in such event the then-current Conversion Factor shall be reduced to 65% for all future Conversions, subject to other reductions set forth in the Typenex Note. In the event the Company elects to prepay all or any portion of the Typenex Note, the Company is required to pay to Typenex an amount in cash equal to 125% multiplied by the sum of all principal, interest and any other amounts owing. The Typenex Note is secured by all of the assets of the Company and includes customary event of default provisions.

 

Typenex has agreed to restrict its ability to convert the Typenex Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. The Typenex Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. The Typenex Note also provides for penalties and rescission rights if we do not deliver shares of our common stock upon conversion within the required timeframes.

 

Additionally, the Company granted Typenex six warrants, corresponding to the delivery of six tranches of cash funds, to purchase shares of the Company’s common stock, $0.001 par value (the “Common Stock”). The first warrant will entitle the holder to purchase a number of shares equal to $43,750 divided by the Market Price, as such number may be adjusted from time to time pursuant to the terms of the Typenex Note, and the remaining warrants will entitle the holder to purchase a number of shares equal to $13,750 divided by the Market Price, as such number may be adjusted from time to time pursuant to the terms of the Typenex Note. Each warrant is not exercisable until each corresponding tranche is funded.

 

The Company first allocated between the Typenex Note and the warrants based upon their relative fair values. The estimated fair value of the warrants issued with the Typenex Note was $43,750. Next, the intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the Typenex Note and the total price to convert based on the effective conversion price. The calculated intrinsic value was $66,667. As this amount resulted in a total debt discount that exceeds the loan proceeds, the amount recorded for the beneficial conversion feature was limited to $43,750. The resulting $87,500 discount to the Typenex Note is being accreted over the seventeen month term of the Typenex Note.

 

During the three and six months ended July 31, 2015, the Company recognized $15,571 and $30,634 of accretion related to the debt discount. No interest expense was recognized as the interest income from the Typenex Investor Notes offset the interest expense from the Typenex Note.

 

During the three months ended July 31, 2015, Typenex converted $23,261 into 143,145 shares of common stock.

 

Vis Vires Group, Inc. Convertible Note

 

On June 8, 2015, Artec and Vis Vires Group (“Vis Vires”) entered into a Securities Purchase Agreement (the "Vis Vires SPA"), for the sale of an 8% convertible note in the principal amount of $69,000 of which Artec received $61,100 after payment of legal fees (the “Vis Vires Note”). The Vis Vires Note matures in nine (9) months on March 10, 2016. If the Vis Vires Note is not paid upon maturity, the interest rate shall increase to twenty-two percent (22%). The Vista Note is convertible into common stock, at Vis Vires’s option, at 58% of the average of the lowest three (3) closing bid prices for our common stock during the ten (10) trading day period prior to conversion. In no event shall Vis Vires effect a conversion if such conversion results in Vis Vires beneficially owning in excess of 9.99% of the outstanding common stock of the Company. The Note and accrued interest may be prepaid from the date of issuance with the following penalties: (i) within 30 days - 110%; (ii) within 31 - 60 days - 115%; (iii) within 61 - 90 days - 120%; (iv) within 91 - 120 days - 125%; (v) within 121 - 150 days - 130%; and (vi) within 151 - 180 days - 135%. Upon the occurrence of a default as described in the Vis Vires Note, the Company shall pay an amount equal to the greater of (i) 150% of the then outstanding principle and interest, or (ii) the "parity value" of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of common stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article 1, treating the trading day immediately preceding the Mandatory Prepayment Date as the "Conversion Date" for purposes of determining the lowest applicable conversion price. The debt discount attributable to the fair value of the beneficial conversion feature amounted to $52,378 for the Vis Vires Note and is being accreted over the term of the Vis Vires Note.

 

During the three months ended July 31, 2015, the Company recognized $813 of interest expense and $10,058 of accretion related to the debt discount.

 

9

  

NOTE 4 – Stockholder's Equity

 

Preferred Stock

 

We do not have an authorized class of preferred stock.

 

Common Stock

 

During the six months ended July 31, 2015, the Company issued 280,000 shares of common stock for total proceeds of $70,000. Also during the six months ended July 31, 2015, the Company issued 25,000 shares of restricted common stock in exchange for services valued at $0.25 per share. The Company valued the restricted shares based on the then current price of our common stock realized from private party sales as this more closely reflects the fair value of the issuance rather than the market price of our thinly traded common stock.

 

During the year ended January 31, 2015, the Company 1) issued 370,255 shares of common stock for $1.00 per share for total proceeds of $370,255, and 2) issued 635,000 shares of restricted common stock in exchange for services valued at $1.00 per share. The Company valued the restricted shares based on current price of our common stock realized from private party sales as this more closely reflects the fair value of the issuance rather than the market price of our thinly traded common stock.

 

NOTE 5 – Related Party Transactions

 

A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

From time to time, Mr. Wickman, CEO, advances non-interest bearing funds to the Company for general operating use. During the six months ended July 31, 2015 and 2014, Mr. Wickman advanced $6,000 and $0 respectively, and was repaid $6,300 and $0 respectively.

 

10

 

CW Web Designs, wholly owned by Caleb Wickman, President, provided data management and client-marketing program development services to the Company. During the three months ended July 31, 2015 and 2014, the Company paid CW Web Designs $0 and $3,500, respectively. During the six months ended July 31, 2015 and 2014, the Company paid CW Web Designs $0 and $13,500, respectively. In addition, Mr. Wickman received $10,000 and $28,000 as compensation during the three months ended July 31, 2015 and 2014, respectively. Mr. Wickman received $27,000 and $54,095 as compensation during the six months ended July 31, 2015 and 2014, respectively.

 

All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business.

 

NOTE 6 – Subsequent Events

 

Management has reviewed material events subsequent of the quarterly period ended April 30, 2015 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.

 

On August 11, 2015, JMJ Financial converted $5,400 of the JMJ Note into 100,000 shares of common stock.

 

On August 24, 2015, LG Capital Funding converted $5,321 of the LG Notes into 378,995 shares of common stock.

 

11

 

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

 

Forward-Looking Statements

 

This Report on Form 10-Q contains forward-looking statements which involve assumptions and describe our future plans, strategies, and expectations, and are generally identifiable by use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project,” or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.

 

Such forward-looking statements include statements regarding, among other things, (a) the potential markets for our products, our potential profitability, and cash flows (b) our growth strategies (c) our future financing plans and (d) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found at various places throughout this report including, but not limited to the discussions under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and "Business." Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the matters described in this Form 10-K generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and factors that may cause actual results to be materially different from those discussed in these forward-looking statements. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Accordingly, you are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

 

We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation.

 

Overview

 

We offer a comprehensive suite of online marketing and reporting solutions, including lead generation (prospect email, performance display, mobile marketing); performance media (PPC, SEO, social media, retargeting); and affiliate marketing, as well as other related web services and consultation. We plan to generate revenue by delivering measurable marketing results to clients.

 

Online lead generation is typically generated as clicks from websites or email. Our goal is to engage Internet visitors with targeted media and to connect our marketing clients with their potential clients on line.

 

12

 

We use world-class technology solutions to create advertising campaigns for clients to target potential customers, optimize those campaigns in real time and track tangible results. Through a single advertising budget, we enable our clients to reach customers —whether using traditional computing devices or mobile devices—across the Internet, including through all of the major search engines and leading general interest and vertically focused online publishers.

 

Our retargeting and display marketing solutions target consumers that have recently search for a client’s business keywords as well as those who have recently visited their website. We continue to expand our platform to include additional advertising products designed specifically for the needs of our clients. Our website solutions are designed to help client turn more of their website visitors into leads, manage those leads more effectively and convert more of them into customers.

 

We focus on serving clients in large, information-intensive industry verticals where relevant, targeted media and offerings help visitors make informed choices, find the products that match their needs, and thus become qualified customer prospects for our clients.

 

Additionally, we recently entered the student loan debt consultation business whereby we assist debtors in maximizing the benefits afforded by a myriad of government programs targeted to student loan debt holders.

 

Products/Services

 

We combine advanced, publisher-agnostic technology and an experienced, digitally sophisticated direct sales force to provide clients with a single, easy to use and cost-effective solution to acquire, maintain and retain customers using digital and traditional media.

 

Artec owns or accesses targeted databases and utilizes proprietary technology to create local, regional and national marketing campaigns on demand providing clients with the ability to acquire new customers. We run advertisements or other forms of marketing messages and programs through multiple channels (i.e. Email, Direct Mail, Social Media, SMS, radio and telecommunication) to create responders for client offerings. We optimize client matches and media yield such that we achieve desired results for clients and a sound financial outcome for Artec.

 

We deliver cost-effective marketing results to our clients, predictable and scalable, most typically in the form of a qualified lead, click or call. These leads, clicks or calls can then convert into a customer or sale for the client at a rate that results in an acceptable marketing cost to them. We get paid by clients primarily when we deliver qualified results as defined in our agreements. Typically, leads are routed through a call center or other offline acquisition process. Online leads are usually generated as clicks from websites. Our marketing services include but are not limited to:

 

·	Affiliate and performance marketing,
·	Search advertising,
·	Display advertising,
·	Telecommunications
·	Retargeting,
·	Email marketing,
·	Lead generation,
·	Creative design, and
·	Consulting services.

 

13

 

For advertisers our platform allows us to connect clients to multiple online publishers. For publishers our platform provides access to a significant advertiser base to gain access to a broader range of advertising inventory. The combination of these end-to-end online marketing capabilities enables us to offer clients the simplicity of a single advertising budget that meets their marketing objectives.

 

Our search product is focused on assuring that our clients’ advertisements appear prominently among the search results when local consumers enter certain keywords on leading local search sites such as Google, Yahoo! and Bing and social networks such as Facebook and LinkedIn.

 

Our display product is primarily focused on maximizing the exposure for clients that want to broadcast a message to a specific target online audience.

 

Our remarketing and search retargeting products allow us to target consumers who have previously visited a specific client’s website, either through a search marketing campaign or a display marketing campaign, or who have previously searched for a client’s keywords. When the potential customer visits any other site within our remarketing network, we can remarket to the target customer on behalf of that client.

 

Our lead conversion helps clients manage their leads and convert more of them into customers.

 

Our capabilities:

 

·	Software-based solution that provides back-end automation and optimization technologies to manage advertising spend across a broad array of online publishers and media outlets;
·	For advertisers interested in search engine marketing, automation of build-up of keyword search criteria for the leading search engines;
·	Seting and optimization of bids for keywords based on client products and services;
·	Placement of display advertisements on websites selected in accorance with custom profiles;
·	Integration with leading social media sites;
·	Proprietary algorithms multiple times a day to evaluate each publisher and keyword, dynamic shifting of spend to continuously optimize and improve campagin performance;
·	Proprietary reverse proxy technology that automatically tracks campaign-generated activity; and
·	Access to multiple publishers and advertisers.

 

Our student loan debt relief consultation services earn a contracted fee upon the completion of our services. Leads for this service are through two company owned websites, www.NSLRelief.com and www.NSLAlliance.com. Through these websites, prospective clients can request information, receive a free consultation and contact a student loan counselor.

 

Consulting

 

We work with clients on a consultative basis to help them achieve their markeing objectives, educating and guiding them through the opportunities arising from and the mechanics of online advertising. Our consulting services provide clients access to technology and media that they could not access by themselve, and proven in ways they understand.

 

Scale and Experience

 

Our scale and experience in purchasing online advertising from publishers allows us to make more efficient and effective purchasing decisions on behalf of our clients. In addition, our platform enables us to connect our clients to a wide array of online publishers. Our platform not only allows us to expand the reach of our publisher network, but also allows us quickly to test and identify better performing advertising options for our clients.

 

14

 

Client Relationships

 

As new online advertising opportunities emerge, such as mobile, video and social media, we believe that having a direct client relationship will enable us to offer additional products and services to our clients.

 

Technology

 

Running thousands of online advertising campaigns simultaneously across multiple publishers poses significant technical challenges. While technologies exist to help larger companies manage and optimize their online marketing spend, we believe that such solutions are too expensive and too complex to scale down to many of our clients’ monthly advertising budget. We have built our services, systems and networks for maximum scalability and flexibility to manage these types of campaigns, and we have invested heavily in automation technologies that reduce the level of human intervention required to support these campaigns. This automation is critical to our ability to scale our business and deliver moderately budgeted campaigns in a cost-effective manner.

 

Strategy

 

We generate revenue by providing marketing and advertising solutions for our clients through direct sales and our online marketing platform. We sell our marketing products based on a consultative approach to discover customer needs and build pricing and packages which provide a positive return on their investment. While we do not commit to a specific set of results, we work with our clients to meet their marketing objectives. Clients primarily pay us for leads that they can convert into customers. Typically, leads are routed through a call center or other offline customer acquisition process. Online leads are usually generated as clicks from websites or email. In brief, Artec helps clients communicate their message to potential new customers by delivering compelling offers through the use of proprietary products, media channels and distribution platforms.

 

We believe that we are in the early stages of a large and long-term business opportunity presented by the shift from traditional media formats to digital media formats. Our strategy for pursuing this opportunity includes the following key components:

 

·       Expand Media Offerings. We have developed a platform that enables us more easily to connect our client advertisers to a broader array of online publishers and, in the future, to reach customers through new formats such as mobile and video. Our plan has been, and continues to be, to fulfill, track and optimize a client’s entire digital media plan, regardless of media property or format.

 

·       Develop Digital Marketing Software Solutions. Our current products target our clients’ needs to acquire customers through online media buying. We believe that there will be continued movement towards digital platforms in the other segments of our clients’ marketing activities, such as marketing automation, lead conversion and customer relationship management. To address these and other needs, we plan to continue investing in the internal development or potential acquisition of products and services in these adjacent segments.

 

Affiliate and Performance Marketing Key Trends and Drivers

 

·	One of the most effective ways to enter new markets (pay-for-performance model represents low risk and low overhead while also providing access to local marketing experts without having to bring on full-time staff),
·	Growth of mobile,
·	With the rise in multi-channel retailing, expect a tighter integration of marketing channels. Performance marketing, for example, will be more closely aligned with retargeting and display,
·	Big data solutions that include affiliate program data will enable more targeted, timely ads and offers to be delivered at the right audience at the right time on the right device.
·	Aligned with the way that consumers shop and behave,
·	It’s a proven acquisition channel for new customers and provides a low risk opportunity to try new ideas, and
·	Deal-driven consumers turn to affiliate sites first and frequently, because they believe offers from affiliate sites are better than those presented on a retailer’s

 

We differentiate ourselves by utilizing our marketing platform to attract large multi-location organizations. These organizations have seen dramatic cuts to their marketing departments over the last few years forcing them to work more with less. We help centralize and streamline marketing initiatives for these large decentralized organizations allowing them, in many cases for the first time in years, to stop playing defense and become offensive in the management and implementation of their marketing efforts. In essence, we allow independent field offices, franchise owners, sales agents to have access to easy to utilize fortune 500 type marketing services at their disposal 24/7. We have proven our services lower client acquisition costs, increase the overall spend of client initiatives, creating more loyal and profitable clients.

 

15

 

Our Market

 

The ability to market to and acquire customers is a critical driver of success for businesses, often representing a very significant portion of their cost base. Business to consumer e-commerce was approximately a $1.0 trillion industry globally in 2012, growing at 16.7% per year from 2012 to 2017, according to International Data Corporation, or IDC. Penetration of smartphones and tablets has also driven rapid growth of mobile commerce, which represented $64.5 billion globally in 2012, and is expected to grow at 35.5% CAGR between 2012 and 2017 according to IDC. The internet and mobile devices are becoming increasingly important mediums for businesses to generate customer engagement and leads that ultimately result in sales, both online and offline. However, these mediums are also complex and fragmented, making it difficult and costly to engage and convert customers. Illustrating the difficulty of converting customers, 88% of online shoppers surveyed in February 2013 by comScore indicated they had from time to time placed items in a shopping cart and left a site without making a purchase. It is therefore important for businesses to develop and execute online and mobile marketing campaigns efficiently and effectively harnessing consumer intent, big data, technology, measurability, and the ability to target, at scale. According to ZenithOptimedia, marketers spent $88.6 billion on internet advertising in 2012, with this spend expected to grow at a compound annual growth rate of over 14.3% through 2015.

 

Competitive Landscape

 

The market for online advertising solutions is intensely competitive and rapidly changing, and with the introduction of new technologies and market entrants, we expect competition to intensify in the future. Many of our current and potential competitors enjoy substantial competitive advantages, such as greater name recognition, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. In addition, many of our current and potential competitors have established marketing relationships and access to larger customer bases.

 

Our competitors include:

 

·      Internet Marketing Providers. We compete with large Internet marketing providers such as Google, Yahoo! and Microsoft. These providers typically offer their products and services through disparate, online-only, self-service platforms. We compete with these companies on the basis of our product offerings and our publisher-agnostic services to our clients. Although we compete against the self-service offerings of these large providers, we also have business relationships with them. We also believe that we provide a valuable service to these companies by connecting them to a large number of clients, which are generally disinclined to purchase online advertising via self-service platforms

 

·      Traditional, Offline Media Companies. We compete with traditional yellow page and newspaper companies with large, direct sales forces. While these traditional media companies have made investments to address the migration of advertising expenditures away from their existing print products, we believe that they face the prospect of cannibalizing their existing higher margin products that they own and the challenge of re-training and restructuring their sales forces, most of whom have only sold print products and many of whom still receive the majority of their income from selling those products. We compete with these companies on the basis of the strength and breadth of our technology platform and product offering and our focus exclusively on Internet advertising.

 

Intellectual Property

 

We have developed a few different very important software/applications, which we consider to be proprietary including a custom gateway that runes real-time analytics and tracking on all campaigns powered by our resources. This software helps us manage and mitigate exposure to fraud, while enabling us to purchase media more intelligently, with better control over our advertiser’s budget in order to maximize campaign efficiency and effectiveness. In addition, we have developed Email Service Provider (“ESP”) and Message Transfer Agent (“MTA”) software, which allows clients to log in and manage their own mailings directly. We have also developed dialer/phone systems to maximize efficiency with respect to telecommunication client management.

 

16

 

Results of Operations

 

We are a start-up company. We did not begin meaningful operations until our first quarter of 2014. As of July 31, 2015, we had total assets of $9,967 and total liabilities of $230,604. Since our Inception to July 31, 2015, we have accumulated a deficit of $1,717,185. We anticipate that we will continue to incur losses for the foreseeable future. Our financial statements have been prepared assuming that we will continue as a going concern. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

 

Three and Six Months Ended July 31, 2015 Compared with the Three and Six Months Ended July 31, 2014

 

Revenue

 

Revenue is generated from advertising and marketing services, through the sale of data used by companies in the targeted marketing of their products and services via direct mail and contracted fees from student loan borrowers in exchange for providing services designed to assist the borrower in managing their student loans and enroll in qualifying programs that ease their financial burden.

 

Revenue decreased $3,446 to $61,224 during the three months ended July 31, 2015 compared to $64,670 during the three months ended July 31, 2014. Revenue increased $114,139 to $197,477 during the six months ended July 31, 2015 compared to $83,338 during the six months ended July 31, 2014. The three month year-over-year decrease is due to decreased advertising services revenue offset by higher student loan services revenue. The six month year-over-year increase is due to increased direct mail revenue and increased revenue from student loan services which did not exist in 2014.

 

Operating Expenses

 

Operating expenses decreased $119,586 to $114,263 during the three months ended July 31, 2015 compared to $233,849 during the three months ended July 31, 2014. Operating expenses decreased $46,106 to $342,937 during the six months ended July 31, 2015 compared to $389,043 during the six months ended July 31, 2014. The three and six month year-over-year decrease is due to the absence of $100,000 of stock based compensation in 2015 compared to 2014, decreases in officer compensation, web development and programming and professional fees offset by higher marketing costs related to student loan services.

 

Other Income (Expense)

 

During the three and six months ended July 31, 2015, the Company incurred $13,534 and $20,451, respectively of interest expense related to the stated interest contained in our outstanding convertible promissory notes and $58,363 and $102,886, respectively of amortization related to the debt discount resulting from the beneficial conversion feature contained on our convertible promissory notes. No such expense was recognized during the three and six months ended July 31, 2014.

 

Liquidity and Capital Resources

 

Our principal source of liquidity is cash in the bank. As of July 31, 2015 our current assets were $9,967 and were comprised of $7,193 in cash and $2,774 of accounts receivable. Due to the “start-up” nature of our business, we expect to incur losses as we develop and introduce our products and services. These conditions raise doubt about our ability to continue as a going concern. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of business operations. We will try to raise additional funds through private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

17

 

Cash Flows from Operating Activities

 

For the six months ended July 31, 2015, net cash flows used in operating activities was $213,252, compared to $246,993 for the six months ended July 31, 2014. The $33,741 decrease was due to continued efforts to manage the Company’s expenses.

 

Cash Flows from Financing Activities

 

For the six months ended July 31, 2015, we generated cash flows from financing activities of $163,700 from the issuance of common stock and loans compared to $320,255 for the six months ended July 31, 2014. We have financed our operations primarily through the issuance of debt and equity.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Critical Accounting Estimates

 

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Certain of these significant accounting policies require us to make critical accounting estimates, as defined below.

 

A critical accounting estimate is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 

 

	·	we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and
	·	different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

 

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations.

 

Our most critical accounting estimates include:

 

·

the recognition and measurement of current and deferred income taxes, which impact our provision for taxes.

 

Below, we discuss this policy further, as well as the estimates and judgments involved.

 

18

 

Income Taxes

 

Provisions for income taxes are based on taxes payable or refundable for the current period and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.

 

When accounting for Uncertainty in Income Taxes, first, the tax position is evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company’s utilization of U.S. Federal net operating losses will be limited in accordance to Section 381 rules. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

At the end of the period covered by this quarterly report, the Chief Executive and Chief Financial Officer of the Company (the “Certifying Officer”) conducted an evaluation of the Company’s disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officer, to allow timely decisions regarding required disclosure.

 

Based on this evaluation, the Certifying Officer has concluded that the Company’s disclosure controls and procedures were not effective, for the quarter covered by this report, to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act, and the rules and regulations promulgated there under.

 

Management has found it necessary to limit the Company’s administrative staffing in order to conserve cash, until the Company’s level of business activity increases. As a result, there is limited segregation of duties amongst the employees. The Company and its independent public accounting firm have identified this as a material weakness in the Company’s internal controls. The Company intends to remedy this material weakness by hiring additional employees and reallocating duties, including responsibilities for financial reporting, among the employees as soon as there are sufficient resources available. However, until such time, this material weakness will continue to exist. Despite the limited number of employees and limited segregation of duties, management believes that the Company is capable of following its disclosure controls and procedures effectively.

 

Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

19

 

PART II – OTHER INFORMATION

 

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

 

During the three months ended July 31, 2015, the Company issued 210,000 shares of common stock to three prior purchasers of our common stock in order to bring their issuance into parity with our revised equity offering. Additionally, the Company issued 221,376 shares of common stock upon the conversion of $48,533 of convertible promissory notes.

 

On June 8, 2015, Artec and Vis Vires entered into a $69,000 Convertible Promissory Note., See “NOTE 3 – Convertible Promissory Notes” to the notes to our financial statements for more information.

 

The Note and common stock issuances were issued in reliance upon exemptions from registration pursuant to, among others, Section 4(2) under the Securities Act of 1933, as amended (the “Securities Act”) and Regulation S promulgated under the Securities Act.

 

20

 

Item 6. Exhibits

 

Exhibit No.		Description of Exhibit
10.1*		Securities Purchase Agreement dated June 8, 2015 between Artec Global Media, Inc. and Vis Vires Group, Inc.
10.2*		Convertible Promissory Note dated June 8, 2015 between Artec Global Media, Inc. and Vis Vires Group, Inc.
31.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS **		XBRL Instance Document
101.SCH **		XBRL Taxonomy Extension Schema Document
101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB **		XBRL Taxonomy Extension Label Linkbase Document
101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

____________________

*Filed herewith

 

** Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

21

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

	Artec Global Media, Inc.
	(Registrant)
Date: September 14, 2015	By	/s/ Caleb Wickman
		Caleb Wickman
		President and Treasurer
		(Principal Executive Officer and Principal Financial Officer)

 

 

 

 22

---