UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended September 30, 2017

 

or

 

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

 

Commission File Number: 333-182856

 

OptiLeaf, Inc.

(Exact name of registrant as specified in its charter)

 

Florida		47-1553134
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

100 N Main St,

Wichita, KS, 67202

(Address of principal executive offices)(Zip Code)

 

(855) 678-4532

(Registrant’s telephone number, including area code)

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

 

N/A

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

 

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

 

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

 

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

 

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

 

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

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

As of September 30, 2017, the registrant had 21,443,752 shares of its common stock outstanding.

 

 

 

TABLE OF CONTENTS

 

		Page
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4.	Controls and Procedures	11
PART II-- OTHER INFORMATION		13
Item 1.	Legal Proceedings	13
Item 1A.	Risk Factors	13
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3.	Defaults Upon Senior Securities	13
Item 4.	Mine Safety Disclosures	13
Item 5.	Other Information	13
Item 6.	Exhibits	14
SIGNATURES		15

 

 

OptiLeaf Incorporated

Condensed Balance Sheets

September 30, 2017 and December 31, 2016

(unaudited)

 

		September 30, 2017				December 31, 2016
ASSETS
Current Assets:
Cash		$	67,186			$	194,778
Accounts receivable			5,351				-
Inventory			543				-
Total current assets			73,080				194,778
Computer equipment, net			31				2,660
Other Assets
Employee advance			2,255				-
Security deposit			1,144				1,144
Total other assets			3,399				1,144
		$	76,510			$	198,582
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses		$	26,977			$	20,908
Total current liabilities			26,977				20,908
Commitments
Stockholders’ Equity:
Common stock, no par value; 100,000,000 shares authorized, 21,443,752 and 20,210,419 shares issued and 20,443,752 and 19,210,419 shares outstanding at September 30, 2017 and December 31, 2016, respectively			746,000				711,000
Treasury Stock, at cost, 1,000,000 shares at September 30, 2017 and December 31, 2016 respectively			(40,000	)			(40,000	)
Accumulated deficit			(656,467	)			(493,326	)
			49,533				177,674
		$	76,510			$	198,582

 

See accompanying notes to unaudited condensed financial statements.

 

 

OptiLeaf Incorporated

Condensed Statements of Operations

(unaudited)

 

		Three Months Ended								Nine Months Ended
		September 30, 2017				September 30, 2016				September 30, 2017				September 30, 2016
Sales		$	10,554			$	-			$	12,855			$	-
Cost of goods sold			(6,790	)			-				(6,790	)			-
Gross margin			3,764				-				6,065				-
Expenses:
Professional fees			7,266				8,634				25,653				41,712
Payroll			27,268				41,852				96,191				130,044
Rent			6,586				3,846				14,100				11,440
Supplies			6,702				809				16,276				1,216
Travel			877				764				4,105				1,881
Research and Development			-				614				-				20,037
Other			10,459				6,037				20,370				15,105
			59,158				62,556				176,695				221,435
Net loss before other income and provision for income taxes			(55,394	)			(62,556	)			(170,630	)			(221,435	)
Other income
Other Income			-				-				7,451				-
Interest income			5				62				39				171
Net loss before provision for income taxes			(55,389	)			(62,494	)			(163,140	)			(221,264	)
Provision for income taxes			-				-				-				-
Net loss		$	(55,389	)		$	(62,494	)		$	(163,140	)		$	(221,264	)
Basic and diluted loss per share		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.01	)
Basic and diluted weighted average number of shares outstanding			20,288,197				20,210,419				20,236,345				20,210,419

 

See accompanying notes to unaudited condensed financial statements.

 

 

OptiLeaf Incorporated

Condensed Statements of Cash Flows

(unaudited)

 

		Nine Months Ended
		September 30, 2017				September 30, 2016
Cash flows from operating activities:
Net loss		$	(163,140	)		$	(221,264	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			2,629				2,629
Decrease (increase) in:
Accounts receivable			(5,352	)			-
Security deposits			-				1,144
Inventory			(543	)			-
Increase in accounts payable and accrued expenses			6,069				4,004
Net cash used in operating activities			(160,337	)			(213,487	)
Cash flows from investing activities:
Employee Advance			(2,255	)			-
Net cash used in investing activities			(2,255	)			-
Cash flows from financing activities:
Sale of common stock			35,000				-
Treasury Stock Purchase			-				(40,000	)
Net cash provided by (used in) financing activities			35,000				(40,000	)
Net decrease in cash			(127,592	)			(253,487	)
Cash at beginning of period			194,778				504,971
Cash at end of period		$	67,186			$	251,484
Supplemental cash flow information:
Cash paid during the period for:
Interest		$	-			$	-
Income taxes		$	-			$	-

 

See accompanying notes to unaudited condensed financial statements.

 

 

NOTES TO THE CONDENSED FINANICAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)

 

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

 

Organization

OptiLeaf Incorporated (“OptiLeaf” or the “Company”) was incorporated in Florida in August 2014. The Company has been in the development stage since inception and has not generated significant sales to date. The Company plans to develop, market and sell integrated software and hardware to the agriculture industry for the seamless tracking and management of growth, task automation and sale of their clients’ products.

 

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such principles and regulations of the Securities and Exchange Commission for Form 10-Q. All adjustments, consisting of normal recurring adjustments, have been made which, in the opinion of management, are necessary for a fair presentation of the results of interim periods. The results of operations for such interim periods are not necessarily indicative of the results that may be expected for a full year. The unaudited condensed financial statements contained herein should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2016.

 

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At September 30, 2017 and December 31, 2016, the Company had no cash equivalents.

 

Use of Estimates

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

 

Property and Equipment

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

 

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

 

Capitalized Software Development Costs

Software development costs are expensed as incurred until technological feasibility of the product is established. Development costs incurred subsequent to technological feasibility will be capitalized and amortized on a straight-line basis over the estimated economic life of the product. Capitalization of computer software costs will be discontinued when the computer software product is available to be sold, leased, or otherwise marketed. Amortization will begin when the product is available for release to customers. Management has determined as of September 30, 2017 that the software has not yet reached the stage of technical feasibility.

 

 

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

 

Revenue Recognition

In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various revenues streams of the Company:

 

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

 

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts which represents its best estimate of probable losses inherent in the accounts receivable balance. The Company evaluates specific accounts when it becomes aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its liquidity or financial viability, credit ratings, or bankruptcy. The Company periodically adjusts this allowance based upon its review and assessment of each category of receivables. As of September 30, 2017, the allowance for doubtful accounts was $0.

 

Research and Development

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

 

Net Loss Per Common Share

Basic net loss per common share is calculated using the weighted average common shares outstanding during each reporting period. Diluted net loss per common share adjusts the weighted average common shares for the potential dilution that could occur if common stock equivalents (convertible debt and preferred stock, warrants, stock options and restricted stock shares and units) were exercised or converted into common stock. There were no common stock equivalents at September 30, 2017 and 2016.

 

Income Taxes

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

 

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

 

The Federal and state income tax returns of the Company for 2016, 2015 and 2014 are subject to examination by the internal Revenue Service and state taxing authorities for three (3) years from the date filed.

 

Stock-Based Compensation

The Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value using an option pricing model and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant) using the straight-line method. ASC 718 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from initial estimates.

 

 

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

 

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

  

Fair Value of Financial Instruments

Pursuant to ASC No. 820, “Fair Value Measurement and Disclosures”, the Company is required to estimate the fair value of all financial instruments included on its balance sheets as of September 30, 2017 and December 31, 2016. The Company’s financial instruments consist of accounts payable and accrued expenses. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.

 

Recent Pronouncements

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

 

The FASB issued ASC 606 as guidance on the recognition of revenue from contracts with customers in May 2014 with amendments in 2015 and 2016. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The company will adopt the guidance on January 1, 2018 and apply the cumulative catch-up transition method. The transition adjustment to be recorded to stockholders’ equity upon adoption of the new standard is not expected to be material.

 

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

 

Note 2. GOING CONCERN

 

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

 

The Company has experienced a loss from operations during its development stage as a result of its investment necessary to achieve its operating plan, which is long-range in nature. For the period from August 11, 2014 (inception) to September 30, 2017, the Company incurred a net loss of approximately $656,000. In addition, the Company has just started revenue generating operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

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

 

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

 

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

 

 

Note 3. COMPUTER EQUIPMENT (NET)

 

Equipment is recorded at cost and consisted of the following:

 

		September 30,				December 31,
		2017				2016
Computer equipment		$	10,514			$	10,514
Less: accumulated depreciation			(10,483	)			(7,854	)
		$	31			$	2,660

 

Depreciation expense was $2,629 for the nine months ended September 30, 2017 and 2016.

  

Note 4. STOCKHOLDERS’ EQUITY

 

Common stock

The Company has authorized 100,000,000 shares of no par value common stock. At September 30, 2017, the number of shares of common stock issued and outstanding was 20,443,752. 

 

The Company sold 233,333 shares of common stock during the three months ended September 30, 2017 for $35,000.

 

Treasury stock

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

 

Note 5. CONCENTRATION CREDIT RISK

 

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

 

Note 6. COMMITMENTS AND CONTINGENCIES

 

The Company leases one of its offices in a month to month arrangement. The monthly minimum lease payments are $1,144 plus a pro rata share of operating expenses. The other office space monthly minimum lease payment is $677 per month and the lease expires on May 31, 2019.

 

Note 7. INCOME TAXES

 

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

 

Income tax provision at the federal statutory rate			15	%
Effect of operating losses			(15	)%
			0	%

 

At September 30, 2017, the Company has a net operating loss carryforward of approximately $656,000 for Federal and state purposes. This loss will be available to offset future taxable income. If not used, this carryforward will begin to expire in 2034. The deferred tax asset relating to the operating loss carryforward has been fully reserved at September 30, 2017 and December 31, 2016. The change in the valuation allowance was approximately $233,000 and $95,000 respectively. The principal difference between the operating loss for income tax purposes and reporting purposes is disallowed meals and entertainment and a temporary difference in depreciation expense. 

 

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

 

 

Item 2.

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

 

The information and financial data discussed below is derived from our unaudited financial statements, herein, for the period from inception, August 11, 2014 through September 30, 2017.  The unaudited financial statements were prepared and presented in accordance with generally accepted accounting principles in the United States. The information and financial data discussed below is only a summary and should be read in conjunction with the related notes contained elsewhere in this prospectus. The financial statements contained elsewhere in this prospectus fully represent our financial condition and operations; however, they are not indicative of our future performance.  

 

Overview

 

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

 

As of this filing, OptiLeaf has completed the development of its growth management "GrowPro" and point-of-sale "POS" software. We believe these software applications are the next generation POS and growth management systems that provide a complete solution for cultivation operations, processing and manufacturing, and dispensaries in the legal medical and recreational cannabis industry.

 

Our Product

 

Our POS software is designed to work with almost all POS hardware and uses devices that dispensary owners already have. Our customized reports are designed to enable dispensary owners and managers to make informed decisions on how to increase profit and reduce operational costs under varying regulatory and state laws. Our system is designed to provide a mechanism to prevent any sale from exceeding state regulations, and would therefore automatically verify the customers' age and their purchase limits, print compliant labels and receipts, and digitally file all patient records and reports.

 

We believe our GrowPro growth management software allows cultivators to track with real-time data of their plants' history including genealogy, events, growth stages, watering and nutrient cycles, yields, harvesting, and every aspect of the grow operations.

 

Both products have been designed to integrate with Metrc™ (state traceability system) for the State of Colorado and Oregon. We believe this will relieve growers and dispensary owners from having to do double entry and manually reporting sales and cultivation data to the state. The system is designed so that sales and cultivation data are automatically downloaded and synced accurately with state traceability systems. OptiLeaf plans on launching its software growth management and point of sales software suite on or around December 1, 2017.

 

Currently, there are four customers who have signed on and are using OptiLeaf GrowPro and POS software in their facilities. Among these customers, three have collaborated with developing the features and enhancements of the software. These customers also beta tested the software for the past six months. OptiLeaf offers these robust "Retail" and "Grow" management systems as subscriptions for $395 each per month.

 

OptiLeaf has also opened a sales office in Denver, CO. We believe that having a local presence will help accelerate sales and provide better customer service and support. In addition, we believe that having a local market presence helps us gain a better understanding of the needs of our customers as well as challenges and opportunities in the market.

 

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

 

Optileaf plans on commencing the development of its wireless network censors in the fourth quarter of 2017. We believe our integrated hardware will be capable of monitoring and adjusting light, soil moisture, CO2, temperature, ventilation, nutrients, and humidity as needed, in real time and around-the-clock.

 

 

Our Strategy

 

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

 

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

 

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

 

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

 

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

 

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

 

Marketing

 

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

 

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

 

There are a total of 7,300 potential customers in the states of Colorado, Oregon and Washington.

 

Operations

 

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

 

 

Over the next twelve months, we anticipate expenses of up to $225,000 including general, administrative and corporate expenses. The extent of such expenses will depend upon the successful implementation of our financing strategy and the acceleration of our business plan accordingly.

 

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

 

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

 

Results of Operations

 

We have conducted development operations during the period from inception (August 11, 2014) to September 30, 2017. We have generated $12,855 in revenue during this period. We experienced a net loss during the fiscal quarter ending September 30, 2017 of $55,389 compared to a net loss of $62,494 for the fiscal quarter ending September 30, 2016.We had net losses of $656,000 for the period from inception (August 11, 2014) to September 30, 2017.

 

Liquidity and Capital Resources

 

As of September 30, 2017, we had cash of $67,186, compared to $194,778 as of December 31, 2016. Our primary uses of cash were for employee compensation and working capital. The main sources of cash were from our founders and investors. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:

 

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

 

As the Company has experienced a decrease in its available capital during each of the past 2 fiscal years, and we expect this trend to continue in the current year, the Company will likely need to raise additional capital in the current fiscal year to continue to finance its business plans and activities. There can be no assurance that the Company will be able to raise such capital, or on such terms as our acceptable to management. If the Company fails to raise additional capital, the Company could be unable to execute on its business plans.

 

We plan to fund our activities during and beyond 2017 through our existing cash on hand and through revenue generated through the sale of our product, and through additional debt or equity financing if available. We cannot be certain that such funding will be available on acceptable terms, or available at all. To the extent that we raise additional funds by issuing debt or equity securities or through bank financing, our stockholders may experience significant dilution. If we are unable to raise funds when required or on acceptable terms, we may have to significantly scale back, or discontinue, our operations.

 

 

Off-Balance Sheet Arrangements

 

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

 

Going Concern

 

Our financial statements have been prepared on a going concern basis. As of September 30, 2017, we have not generated significant revenues since inception. We expect to finance our operations primarily through our existing cash, our operations and any future financing.  However, there is no assurance we will be able to obtain such capital, through equity or debt financing, or any combination thereof, or on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet our capital needs. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

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

 

Item 4.

Controls and Procedures

  

Evaluation of Disclosure Controls and Procedures

 

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

 

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

 

 

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2017. The framework used by management in making that assessment was the criteria set forth in the document entitled ” Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our President and Chief Financial Officer have determined and concluded that, as of September 30, 2017, the Company’s internal control over financial reporting were not effective.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control our financial reporting as of September 30, 2017, the Company determined that the following items constituted a material weakness:

 

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

 

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

 

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

 

Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report (i.e. the third quarter of the fiscal year ended December 31, 2017) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II:  OTHER INFORMATION

 

Item 1.

Legal Proceedings

  

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

 

Item 1A.

Risk Factors

 

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

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

 

Item 5.

Other Information

 

None.

 

 

 

Item 6.

Exhibits, Financial Statement Schedules

 

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

 

*	Filed herewith

**	Previously filed

 

 

SIGNATURES

 

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

 

Date: November 14, 2017

 

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

 

 

 

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