Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our
common stock is currently quoted on the OTC Pink market under the symbol PRTT. There is a limited public trading market for our
shares with only sporadic trading. The last reported trade on December 13, 2018, was 200,000 shares at $1.70. Accordingly, because
of the limited trading information available, we are not including a historical trading table.
As
of the date hereof there are approximately 96 stockholders of record of our common stock, which figure does not take into account
those shareholders whose certificates are held in the name of broker-dealers or other nominee accounts.
There
were no sales of unregistered securities of the Registrant sold within the last three years.
There
was no repurchase made in a month within the last quarter of 2017.
Recent
Issuances of Securities
There
were no issuances of securities in the fourth quarter of 2017. As of December 31, 2017, we have outstanding a total of 1,111,460
shares of common stock.
18,839,918
shares of common stock (including 3,000,000 of restricted shares) and 1,000,000 shares of preferred stock were subsequently issued
in 2018 as follows:
September 11, 2018:
5,000,000
shares of common stock to Una Taylor and 10,393,000 shares of common stock to Yvette Sanchez.
November
27, 2018:
3,000,000 restricted shares of common stock were subsequently issued to Eight Dragons Capital.
November
13, 2018:
1,000,000 shares of preferred stock were subsequently issued to Una Taylor.
December
11, 2018:
246,918 shares of common stock were subsequently issued to Global Startup League as payment for the value of a convertible
note per a settlement agreement dated September 14, 2018.
December
13, 2018:
200,000 shares of common stock were subsequently issued to Sing for Hope Inc.
As
of December 31, 2018, we have outstanding a total of 19,951,378 shares of common stock and 1,000,000 shares of preferred stock.
Penny
Stock Rule
The
ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations
of that state. A number of states require that an issuer’s securities be registered in their state or appropriately exempted
from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities
in any particular state. Further, our common stock most likely will be subject to the provisions of Section 15(g) and Rule 15g-9
of the Exchange Act, commonly referred to as the “penny stock” rule. Section 15(g) sets forth certain requirements
for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of
the Exchange Act.
It
is unlikely that our securities will be listed on any national or regional exchange or The NASDAQ Stock Market in the foreseeable
future. Therefore, our shares most likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act,
commonly referred to as the “penny stock” rule. Section 15(g) sets forth certain requirements for broker dealer transactions
in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The
SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain
exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is:
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Registered
and traded on a national securities exchange meeting specified criterion set by the SEC;
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Authorized
for quotation on The NASDAQ Stock Market;
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Issued
by a registered investment company;
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Excluded
from the definition on the basis of price (at least $5.00 per share) or the issuer’s net tangible assets; or
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Exempted
from the definition by the SEC.
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Broker-dealers
who sell penny stocks to persons other than established customers and accredited investors are subject to additional sales practice
requirements. An accredited investor is generally defined as a person with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse.
For
transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities
and must receive the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction
involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document
relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally, monthly statements must be sent to clients disclosing
recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently,
these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the
ability of stockholders to sell their shares.
These
requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to
make a market in our shares, or they could affect the value at which our shares trade. Classification of the shares as penny stocks
increases the risk of an investment in our shares.
Rule
144
Rule
144 is the common means for a stockholder to resell restricted securities and for an affiliate to sell securities, either restricted
or non-restricted (control) shares. Rule 144 was amended by the SEC, effective February 15, 2008.
Under
the amended Rule 144, an affiliate of a company filing reports under the Exchange Act who has held their shares for more than
six months, may sell in any three-month period an amount of shares that does not exceed the greater of:
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The
average weekly trading volume in the common stock, as reported through the automated quotation system of a registered securities
association, during the four calendar weeks preceding such sale, or
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1%
of the shares then outstanding.
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Sales
by affiliates under Rule 144 are also subject to certain requirements as to the manner of sale, filing appropriate notice and
the availability of current public information about the issuer.
A
non-affiliate stockholder of a reporting company who has held their shares for more than six months, may make unlimited resales
under Rule 144, provided only that the issuer has available current public information about itself. After a one-year holding
period, a non-affiliate may make unlimited sales with no other requirements or limitations.
An
important exception to the above described availability of the amended Rule 144 is that Rule 144 is not available for either a
reporting or non-reporting shell company, unless the company:
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Has
ceased to be a shell company;
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Is
subject to the Exchange Act reporting obligations;
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Has
filed all required Exchange Act reports during the preceding twelve months; and
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At
least one year has elapsed from the time the company filed with the SEC current Form 10 type information reflecting its status
as an entity that is not a shell company.
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Dividends
Policy
We
have never declared cash dividends on our common stock, nor do we anticipate paying any dividends on our common stock in the foreseeable
future.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
PRTT
is an inactive entity, with no current revenues, reporting as a shell public company. The company is seeking outside investors,
most likely though a private placement of company shares, and will commence active business operations of whatever type is appropriate
for investors willing to complete an acceptable transaction with current management. We do not expect to realize revenues until
we have completed a successful transaction without outside investors. In the near term, ongoing expenses, including the costs
associated with the preparation and filing reports with the SEC, will be paid for by advances from stockholders and/or directors,
or possibly from the private sale of securities, either debt or equity. However, there is no assurance that we will be able to
realize such funds on terms favorable to us, or at all.
Significant
Accounting Policies
Accounting
Method
These
financial statements and related notes are presented in accordance with accounting principles generally accepted in the United
States. The Company’s fiscal year-end is December 31.
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 reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
As of December 31, 2017, and 2016 the Company had $0 and $0 of cash and cash equivalents, respectively.
Revenue
Recognition
The
Company will recognize revenue from the performance of its services and/or sale of its products in accordance with ASC 605 “Revenue
Recognition. Revenue will be recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists,
the service is provided, product is delivered, and collectability is assured.
Revenue
from Contracts with Customers
The
Company applies Accounting Standards Update No. 2014-09 which was amended in August 2015 by Update No 2015-14: Revenue from Contracts
with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should
recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to
which it expects to be entitled in exchange for those goods or services. This new guidance is effective for annual reporting periods
beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted this standard on
April 1, 2017 and has chosen to apply the standard using modified retrospective approach. Under the modified approach, financial
statements are prepared for the year of adoption using the new standard, but prior periods presented will not be adjusted. The
Company also determined that a cumulative catch-up adjustment to the opening balance of retained earnings was not necessary due
to a lack of revenue in 2017.
Advertising
Costs
The
Company follows the policy of expensing advertising costs during the period in which they are incurred. The Company incurred no
advertising costs during the years ended December 31, 2017 and 2016, respectively.
Stock-based
Compensation
The
Company adopted ASC 718 effective January 1, 2006 using the modified prospective method. Under this transition method, stock compensation
expense includes compensation expense for all share-based compensation awards granted on or after January 1, 2006, based on the
grant-date fair value estimated in accordance with the provisions of ASC 718. During the years ending December 31, 2017 and 2016,
the Company issued $0 and $0, respectively, in share-based payments for services.
Provision
for Taxes
The
Company applies ASC 740, which requires the asset and liability method of accounting for income taxes. The asset and liability
method requires that the current or deferred tax consequences of all events recognized in the financial statements are measured
by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years.
Deferred tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce its deferred tax assets
when it is more likely than not that all or some portion of the deferred tax assets will not be recovered.
Going
Concern
The
Company applies Accounting Standards Update 2014-15, “Presentation of Financial Statements – Going Concern (subtopic
205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides
guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s
ability to continue as a going concern. The amendments in this update apply to all companies. They become effective in the annual
period ending after December 15, 2016, with early application permitted. The Company adopted this standard on December 15, 2016.
Basic
Loss per Common Share
Basic
loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average
number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income
available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted
average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.
There was a convertible note in default as of December 31, 2017 that was subsequently converted into 246,918 shares of common
stock on December 11, 2018.
Convertible
notes with fixed rate conversion options
The
Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding
principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the
common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount.
The Company records the convertible note liability at its fixed monetary amount by measuring and recording a discount, as applicable,
on the Note date with a charge of interest expense in accordance with ASC 480 – “Distinguishing Liabilities from Equity.”
Convertible
debt
In
July 2017, the FASB issued Accounting Standards Update No. 2017-11 Earnings Per Share (Topic 260) Distinguishing Liabilities from
Equity (Topic 480) Derivatives and Hedging (Topic 8115) (“ASU 2017-11”), which changes the classification analysis
of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain
financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity
classification when assessing whether the instrument is indexed to an entity’s own stock. ASU 2017-11 also clarifies existing
disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or
embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence
of a down round feature. For freestanding equity classified financial instruments, ASU 2017-11 requires entities to present earnings
per share (EPS) in accordance with ASC Topic 260 to recognize the effect of the down round feature when it is triggered. That
effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. For the Company, ASU
2017-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early
adoption is permitted, including adoption in an interim period. The Company adopted this standard on July 1, 2017 and applied
it retroactively to the Company’s financial reporting starting on April 1, 2017.
Recent
Accounting Pronouncements
Management
has considered all recent accounting pronouncements issued since the last audit of the Company’s financial statements. The
Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial
statements
Forward-Looking
and Cautionary Statements
Unless
otherwise indicated, references in this Annual Report on Form 10-K to “we,” “us,” and “our”
are to the Company, unless the context requires otherwise. The following discussion and analysis by our management of our financial
condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and
the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s
Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year
ended December 31, 2016 filed with the Securities and Exchange Commission.
Cautionary
Statement Regarding Forward-Looking Statements
This
report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking
statements are based on our management’s beliefs and assumptions and on information currently available to our management.
Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning
our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment,
potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical
facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,”
“expects,” “hopes,” “intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “will,” “would” or similar expressions.
This
report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking
statements are based on our management’s beliefs and assumptions and on information currently available to our management.
Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning
our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment,
potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical
facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,”
“expects,” “hopes,” “intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “will,” “would” or similar expressions.
Forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking
statements. We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should
not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s
beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in
this report and have filed as exhibits to the report completely and with the understanding that our actual future results may
be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking
statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking
statements, even if new information becomes available in the future.
Additional
information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission,
including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.
Unless
otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,”
“our,” “our company,” “Protect” refer to Protect Pharmaceutical Corporation.
Our
Ability to Continue as a Going Concern
Our
independent registered public accounting firm has issued its report dated February 15, 2019, in connection with the audit
of our annual financial statements as of December 31, 2017, that includes an explanatory paragraph describing the existence of
conditions that raise substantial doubt about our ability to continue as a going concern and Note 2 to the audited financial statements
for the period ended December 31, 2017 also describes the existence of conditions that raise substantial doubt about our ability
to continue as a going concern.
Results
of Operations
For
the Year Ended December 31, 2017 and 2016
We
did not realize revenues for the year ended December 31, 2017 and 2016. For the year ended December 31, 2017, the Company had
operating expenses of $115,400, consisting of professional fees of $115,200 and general & administrative expenses of $200.
The increase in professional fees in the year ended December 31, 2017 is attributable to a contract with Trident for professional
services. Interest expense for the year ended December 31, 2017 was $7,211, with the entire amount related to a convertible note
with Trident.
Total
operating expenses for the year ended December 31, 2016, were $41,707, consisting of $37,225 in professional fees and $4,150 in
executive compensation, and $332 in general and administrative expenses. The Company did not have any interest expense in 2016.
The
net loss for the year ended December 31, 2017 was $122,611 (-$0.11 per share; -$0.10 diluted loss per share, including 246,918
shares attributable to convertible note), compared to a net loss of $41,707 (-$0.04 per share) for the year ended 2016.
Liquidity
and Capital Resources
Total
assets were $0 as of December 31, 2017 and $0 as of December 31, 2016. Total liabilities as of December 31, 2017 were $143,441,
consisting of $101,000 in notes payable, $950 in accounts payable, $35,280 in related-party payables, and $6,211 in interest payable.
At December 31, 2016, total liabilities were $20,830.
Because
we currently have limited revenues and cash, for the immediate future we believe we will have to rely on potential advances from
stockholders to continue to implement our business activities. There is no assurance that our stockholders will continue indefinitely
to provide additional funds or pay our expenses. It is likely the only other source of funding future operations will be through
the private sale of our securities, either equity or debt.
As
of December 31, 2017, we had stockholders’ deficit of $143,441 compared to stockholders’ deficit of $20,830 as of
December 31, 2016.
Plan
of Operation
Our
current business plan is to contemplate a possible a future business model change by the Company to generate adequate revenue
to sustain operations and reduce dependency on shareholder funds. The Company also continues to explore acquisition of or acquisition
by either an affiliated entity or an as yet unknown other entity.
Our
common stock is currently quoted on the QB tier of the OTC Markets under the ticker symbol “PRTT”.
It
is anticipated that business opportunities will come to our attention from various sources, including its officers and directors,
its other stockholders, professional advisors such as attorneys and accountants, securities broker-dealers, venture capitalists,
members of the financial community, and others who may present unsolicited proposals. We have no plan, understandings, agreements,
or commitments with any individual for such person to act as a finder of opportunities for our company.
Because
we currently have no cash, it may be necessary for officers, directors or stockholders to advance funds and we will most likely
accrue expenses until a funding can be accomplished. Management intends to hold expenses to a minimum and to obtain services on
a contingency basis when possible. Further, we expect directors to defer any compensation until such time as we have sufficient
funds. We have not yet entered into any arrangements or definitive agreements to use outside advisors or consultants or to raise
any capital.
We
are currently exploring possible funding sources, but we have not entered into any arrangements or agreements for funding as of
this time. If we are unable to raise the necessary funding, our expansion plans will be delayed indefinitely. There can be no
assurance that we will be able to raise the funds necessary to carry out our business plan on terms favorable to the company,
or at all.
Net
Operating Loss
We
have accumulated approximately $2,986,331 of net operating loss carryforwards as of December 31, 2017. This loss carry forward
may be offset against taxable income and income taxes through the year 2037. The use of these losses to reduce future income taxes
will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. In
the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards
which can be used. No tax benefit has been reported in the financial statements for fiscal years ended December 31, 2017 and 2016
because it has been fully offset by a valuation reserve. The use of future tax benefit is undeterminable because presently we
have not started full operations.
Inflation
Management
is of the opinion that inflation has not and will not have a material effect on our operations in the immediate future. We will
continue to monitor inflation and evaluate the possible future effects of inflation on our business and 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, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
Item
8. Financial Statements and Supplementary Data.
Financial
statements for the fiscal years ended December 31, 2017 and 2016 have been examined to the extent indicated in their reports by
Montgomery Coscia Greilich LLP and Sadler, Gibb & Associates, L.L.C., respectively, independent accountants and have
been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to regulations
promulgated by the SEC.
Section
302 data is not required for a smaller reporting company.
TABLE OF CONTENTS
– FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Montgomery
Coscia Greilich LLP
972.748.0300
p
972.748.0700
f
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of
Protect
Pharmaceutical Corporation:
Opinion
on the Financial Statements
We
have audited the accompanying balance sheet of Protect Pharmaceutical Corporation (the “Company”) as of December 31,
2017, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the year then ended,
and the related notes to the financial statements (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2017, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in Accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audit provide a reasonable basis for our opinion.
Other
Matter
As
discussed in Note 2 to the financial statements, the accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has no assets nor does it have an established source of revenue to cover its operating
costs, which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these
matters are described in Note 2. The financial statements do not include any adjustments to reflect the outcome of this uncertainty.
Our opinion is not modified with respect to this matter.
/s/
Montgomery Coscia Greilich, LLP
We
have served as the Company’s Auditor since 2018
Plano,
TX
February
15, 2019
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of
Protect
Pharmaceutical Corporation
We
have audited the accompanying balance sheets of Protect Pharmaceutical Corporation (“the Company”) as of December
31, 2016 and 2015, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years
in the two year period ended December 31, 2016. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Protect
Pharmaceutical Corporation as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of
the years in the two year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United
States of America.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 3 to the financial statements, the Company has suffered net losses since inception and has accumulated a significant deficit.
These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to
these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/
Sadler, Gibb & Associates, LLC
Salt
Lake City, UT
March
31, 2017
Protect
Pharmaceutical Corporation
Balance
Sheets
|
|
|
December 31, 2017
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|
|
December 31, 2016
|
|
|
|
|
|
|
|
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|
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ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total current assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
TOTAL ASSETS
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable & accrued expenses
|
|
$
|
950
|
|
|
$
|
9,950
|
|
|
Related party payables
|
|
|
35,280
|
|
|
|
10,880
|
|
|
Interest payable
|
|
|
6,211
|
|
|
|
-
|
|
|
Total current liabilities
|
|
$
|
42,441
|
|
|
$
|
20,830
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
101,000
|
|
|
$
|
-
|
|
|
Total long-term liabilities
|
|
$
|
101,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
$
|
143,441
|
|
|
$
|
20,830
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Preferred stock: 10,000,000 shares authorized, at $0.001 par value; 0 shares issued or outstanding as of December 31, 2017 and 2016
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Common stock: 100,000,000 shares authorized at $0.005 par value; 1,111,460 shares issued and outstanding as of December 31, 2017 and 2016
|
|
|
5,557
|
|
|
|
5,557
|
|
|
Additional paid-in capital
|
|
|
9,365,612
|
|
|
|
9,365,612
|
|
|
Accumulated deficit
|
|
|
(9,514,610
|
)
|
|
|
(9,391,999
|
)
|
|
TOTAL STOCKHOLDERS’ DEFICIT
|
|
$
|
(143,441
|
)
|
|
$
|
(20,830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these financial statements.
Protect
Pharmaceutical Corporation
Statements
of Operations
|
|
|
For the year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
115,200
|
|
|
|
37,225
|
|
|
Executive compensation
|
|
|
-
|
|
|
|
4,150
|
|
|
General & administrative
|
|
|
200
|
|
|
|
332
|
|
|
TOTAL OPERATING EXPENSES
|
|
$
|
115,400
|
|
|
$
|
41,707
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS
|
|
$
|
(115,400
|
)
|
|
$
|
(41,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
7,211
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE TAXES
|
|
$
|
(122,611
|
)
|
|
$
|
(41,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(122,611
|
)
|
|
$
|
(41,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
BASIC LOSS PER SHARE OF COMMON STOCK
|
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
1,111,460
|
|
|
|
1,111,460
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED LOSS PER SHARE OF COMMON STOCK
|
|
$
|
(0.10
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
1,204,815
|
|
|
|
1,111,460
|
|
The
accompanying notes are an integral part of these financial statements.
Protect
Pharmaceutical Corporation
Statements
of Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
1,111,460
|
|
|
$
|
5,557
|
|
|
$
|
9,244,288
|
|
|
$
|
(9,350,292
|
)
|
|
$
|
(100,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services contributed by officers
|
|
|
|
|
|
|
|
|
|
|
4,150
|
|
|
|
|
|
|
|
4,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable paid by shareholder
|
|
|
|
|
|
|
|
|
|
|
72,225
|
|
|
|
|
|
|
|
72,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of related party notes payable
|
|
|
|
|
|
|
|
|
|
|
44,949
|
|
|
|
|
|
|
|
44,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,707
|
)
|
|
|
(41,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
1,111,460
|
|
|
$
|
5,557
|
|
|
$
|
9,365,612
|
|
|
$
|
(9,391,999
|
)
|
|
$
|
(20,830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(122,611
|
)
|
|
|
(122,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
|
1,111,460
|
|
|
$
|
5,557
|
|
|
$
|
9,365,612
|
|
|
$
|
(9,514,610
|
)
|
|
$
|
(143,441
|
)
|
The
accompanying notes are an integral part of these financial statements
Protect
Pharmaceutical Corporation
Statements
of Cash Flows
|
|
|
For the year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(122,611
|
)
|
|
$
|
(41,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash provided by operations:
|
|
|
|
|
|
|
|
|
|
Convertible note issued for professional services
|
|
$
|
101,000
|
|
|
$
|
-
|
|
|
Capital contributed by a shareholder
|
|
|
-
|
|
|
|
4,150
|
|
|
Expenses paid on behalf of the company
|
|
|
-
|
|
|
|
10,000
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(9,000
|
)
|
|
|
13,399
|
|
|
Accounts payable - related party
|
|
|
24,400
|
|
|
|
-
|
|
|
Interest payable
|
|
|
6,211
|
|
|
|
-
|
|
|
Total adjustments to reconcile net loss to net cash provided by operations:
|
|
|
122,611
|
|
|
|
27,549
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
-
|
|
|
$
|
(14,158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing
activities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Advances from related party
|
|
|
-
|
|
|
|
14,151
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
$
|
-
|
|
|
$
|
14,151
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
$
|
-
|
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
-
|
|
|
|
7
|
|
|
CASH AT END OF PERIOD
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible note issued for professional services
|
|
$
|
101,000
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
NOTE
1 - FINANCIAL STATEMENTS
The
accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and
cash flows at December 31, 2017 and for all periods presented herein, have been made.
NOTE
2 - GOING CONCERN
The
Company’s financial statements are prepared using accounting principles generally accepted in the United States of America
applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course
of business. However, the Company does not have significant cash or other material assets, nor does it have an established source
of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. It is the intent of the Company
to seek a merger with an existing, operating company. In the interim, shareholders of the Company have committed to meeting its
minimal operating expenses.
In
addition, the inability of The Company to become current in periodic reporting obligations under the federal securities laws during
the fourth quarter limited the information that the Company was able to provide to the public, to investors and to other interested
parties, including customers and certain lenders. Furthermore, such inability to become current limited the Company’s ability
to use equity incentives to attract, retain and motivate employees. Such inability to become current also restricted the Company’s
ability to raise capital through the issuance of equity or debt securities, use equity securities for acquisitions of complementary
companies and businesses and engage in other strategic transactions.
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES
Accounting
Method
These
financial statements and related notes are presented in accordance with accounting principles generally accepted in the United
States. The Company’s fiscal year-end is December 31.
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 reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
As of December 31, 2017 and 2016 the Company had $0 and $0 of cash and cash equivalents, respectively.
Revenue
Recognition
The
Company will recognize revenue from the performance of its services and/or sale of its products in accordance with ASC 605 “Revenue
Recognition. Revenue will be recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists,
the service is provided, product is delivered, and collectability is assured.
Revenue
from Contracts with Customers
The
Company applies Accounting Standards Update No. 2014-09 which was amended in August 2015 by Update No 2015-14: Revenue from Contracts
with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should
recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to
which it expects to be entitled in exchange for those goods or services. This new guidance is effective for annual reporting periods
beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted this standard on
April 1, 2017 and has chosen to apply the standard using modified retrospective approach. Under the modified approach, financial
statements are prepared for the year of adoption using the new standard, but prior periods presented will not be adjusted. The
Company also determined that a cumulative catch-up adjustment to the opening balance of retained earnings was not necessary due
to a lack of revenue in 2017.
Advertising
Costs
The
Company follows the policy of expensing advertising costs during the period in which they are incurred. The Company incurred no
advertising costs during the years ended December 31, 2017 and 2016, respectively.
Stock-based
Compensation
The
Company adopted ASC 718 effective January 1, 2006 using the modified prospective method. Under this transition method, stock compensation
expense includes compensation expense for all share-based compensation awards granted on or after January 1, 2006, based on the
grant-date fair value estimated in accordance with the provisions of ASC 718. During the years ending December 31, 2017 and 2016,
the Company issued $0 and $0, respectively, in share-based payments for services.
Provision
for Taxes
The
Company applies ASC 740, which requires the asset and liability method of accounting for income taxes. The asset and liability
method requires that the current or deferred tax consequences of all events recognized in the financial statements are measured
by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years.
Deferred tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce its deferred tax assets
when it is more likely than not that all or some portion of the deferred tax assets will not be recovered.
Going
Concern
The
Company applies Accounting Standards Update 2014-15, “Presentation of Financial Statements – Going Concern (subtopic
205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides
guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s
ability to continue as a going concern. The amendments in this update apply to all companies. They become effective in the annual
period ending after December 15, 2016, with early application permitted. The Company adopted this standard on December 15, 2016.
Basic
Loss per Common Share
Basic
loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average
number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income
available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted
average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.
There was a convertible note in default as of December 31, 2017 that was subsequently converted into 246,918 shares of common
stock on December 11, 2018.
|
|
|
For the year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
BASIC LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
Net loss (numerator)
|
|
$
|
(122,611
|
)
|
|
$
|
(41,707
|
)
|
|
Common shares outstanding (denominator)
|
|
|
1,111,460
|
|
|
|
1,111,460
|
|
|
Per share amount
|
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED LOSS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
|
Net loss (numerator)
|
|
$
|
(122,611
|
)
|
|
$
|
(41,707
|
)
|
|
Common shares outstanding (denominator)
|
|
|
1,204,815
|
|
|
|
1,111,460
|
|
|
Per share amount
|
|
$
|
(0.10
|
)
|
|
$
|
(0.04
|
)
|
Convertible
notes with fixed rate conversion options
The
Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding
principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the
common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount.
The Company records the convertible note liability at its fixed monetary amount by measuring and recording a discount, as applicable,
on the Note date with a charge of interest expense in accordance with ASC 480 – “Distinguishing Liabilities from Equity.”
Convertible
debt
In
July 2017, the FASB issued Accounting Standards Update No. 2017-11 Earnings Per Share (Topic 260) Distinguishing Liabilities from
Equity (Topic 480) Derivatives and Hedging (Topic 8115) (“ASU 2017-11”), which changes the classification analysis
of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain
financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity
classification when assessing whether the instrument is indexed to an entity’s own stock. ASU 2017-11 also clarifies existing
disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or
embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence
of a down round feature. For freestanding equity classified financial instruments, ASU 2017-11 requires entities to present earnings
per share (EPS) in accordance with ASC Topic 260 to recognize the effect of the down round feature when it is triggered. That
effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. For the Company, ASU
2017-11 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early
adoption is permitted, including adoption in an interim period. The Company adopted this standard on July 1, 2017, and applied
it retroactively to the Company’s financial reporting starting on April 1, 2017.
Recent
Accounting Pronouncements
Management
has considered all other recent accounting pronouncements issued since the last audit of the Company’s financial statements.
The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s
financial statements.
NOTE
4 – RELATED-PARTY TRANSACTIONS
The
Company has recorded advances from related parties and expenses paid by related parties on behalf of the Company as related party
payables. As of December 31, 2017 and December 31, 2016, respectively, the related party payable outstanding balance totaled $35,280
and $10,880, respectively. These payables are non-interest bearing, unsecured, and are due on demand.
NOTE
5 – CONVERTIBLE NOTES
On
April 15, 2017, the Company issued a convertible promissory note (the “Convertible Note”) for $101,000 ($100,000 principal
plus a 1% original issue discount) to Trident Cap X Corp. (“Trident”), a Florida Limited Liability Company. The Convertible
Note has a maturity date of October 15, 2017, with a 15% interest rate in the case that the principle is not paid off in full
by the maturity date. The value of the Convertible Note, plus the amount of all expenses incurred by the Holder relating to the
conversion of this Note into shares of Common Stock, can be converted into shares of PRTT Common Stock at $0.0001 par value per
share.
On
February 8, 2018, Trident assigned the Convertible Note to Global Startup League LLC (“Global”) a Florida Limited
Liability Company.
On
August 6, 2018, GLOBAL filed a Complaint in the Superior Court for the District of Columbia, styled Global Startup League, LLC
v. Protect Pharmaceutical Corporation, alleging that the Company had breached the Convertible Note and owed Global $100,000, plus
default interest of at least 15% annually as provided for in the Convertible Note, along with the related attorney’s fees.
The
Company
reached a settlement with Global on September 14, 2018,
including a release, and had PRTT’s transfer agent issue 246,918 shares of Common Stock to Global to satisfy the obligation.
Interest payable on the Convertible Note as of December 31, 2017 and 2016 was $6,211 and $0, respectively.
NOTE
6 – INCOME TAXES
The
Company provides for income taxes under ASC 740 “Tax Provisions.” ASC 740 requires the use of an asset and liability
approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to
reverse.
ASC
740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be realized.
The
provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate
of 35% to net loss before provision for income taxes for the following reasons:
|
|
|
For the year ended
|
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Income tax expense at statutory rate
|
|
$
|
(42,914
|
)
|
|
$
|
(14,180
|
)
|
|
Contributed services
|
|
|
-
|
|
|
|
1,411
|
|
|
Change in valuation allowance
|
|
|
42,914
|
|
|
|
12,769
|
|
|
Income tax expense per books
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NOL carryover
|
|
$
|
(2,986,331
|
)
|
|
$
|
(2,943,417
|
)
|
|
Contributed services
|
|
|
2,652,102
|
|
|
|
2,652,102
|
|
|
Change in valuation allowance
|
|
|
334,229
|
|
|
|
291,315
|
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $2,986,331 for federal
income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards
may be limited as to use in future years.
Certain
tax attributes are subject to an annual limitation as a result of the change of control as defined under Internal Revenue Code
Section 382.
NOTE
7 – SUBSEQUENT EVENTS
We
reached a settlement with Global on September 14, 2018, including a release, and had the Company’s transfer agent issue
246,918 shares of Common Stock to Global to satisfy the obligation.
In
accordance with ASC 855-10, Company management reviewed all material events through the date of this report and determined that
there are no additional material subsequent events to report.
Item
9A. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
As
of the end of the period covered by this annual report, management, with the participation of our chief executive officer and
principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our “disclosure
controls and procedures”, as defined in the Securities Exchange Act of 1934, Rules 13a-15(e) and 15-d-15(e). Based upon
that evaluation, our principal executive officer and financial officer concluded that as of November 2017, and thereafter, our
disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is:
(i)
recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and
(ii)
accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure.
Management
has retained a CFO consulting service, a certified public accounting firm, and legal counsel to bring systems up to compliance
levels and to assure timely reporting as required by SEC rules.
In
designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to
the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention
or overriding of the controls and procedures. A control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Accordingly,
even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives.
Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable
judgment.
Management’s
Annual Report on Internal Control Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Our control
system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that:
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●
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pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of
our assets;
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|
|
|
|
|
|
●
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provide
reasonable assurance that the transactions are recorded as necessary to permit preparation of the financial statements in
accordance with generally accepted accounting principles and that receipts and expenditures are being made only with proper
authorizations; and
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|
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|
|
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●
|
provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the financial statements.
|
Because
of inherent limitations, internal control over financial reporting may not prevent or detect all 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.
Management,
including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control
over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control Over Financial Reporting – Guidance
for Smaller Public Companies.
Based on our assessment and those criteria, our management concluded that our internal control
over financial reporting was ineffective as of April 1, 2017. Counsel, certified public accountants, and outside consultants have
been retained to bring reporting and internal controls up to standards.
Changes
in Internal Control over Financial Reporting
There
have been no significant changes in our internal controls over financial reporting or in other factors that could materially affect,
or would be likely to materially affect, our internal controls over financial reporting subsequent to the date we carried out
our evaluation.