BIOXYTRAN, INC - Quarter Report: 2018 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the Quarter ended June 30, 2018

Commission File Number: 333-154912

U.S. Rare Earth Minerals, Inc.

(Exact name of registrant as specified in its charter)

(800) 920-7507

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒  Yes  ☐  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, 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.

 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 Exchange Act). ☐  Yes  ☒  No

There were 110,436,350 shares of common stock outstanding as of July 24, 2018.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM FINANCIAL STATEMENTS

U.S. RARE EARTH MINERALS, INC.

BALANCE SHEET

The accompanying notes are an integral part of these unaudited financial statements.

U.S. RARE EARTH MINERALS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to the unaudited financial statements.

U.S. RARE EARTH MINERALS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

U.S. RARE EARTH MINERALS, INC.

NOTES TO FINANCIAL STATEMENTS

AS AT JUNE 30, 2018

(UNAUDITED)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared on substantially the same basis as the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission (SEC) rules and regulations regarding interim financial statements. All amounts included herein related to the financial statements as of the six months ended June 30, 2018, are unaudited and should be read in conjunction with the audited financial statements and the notes there to included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

In the opinion of management, the accompanying financial statements include all necessary adjustments for the fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the full fiscal year ending December 31, 2018.

U.S. Rare Earth Minerals, Inc. was incorporated in the state of Nevada on September 9, 2008.

As used in these Notes to the Financial Statements, the terms the “Company”, “we”, “us”, “our” and similar terms refer to U. S. Rare Earth Minerals, Inc.

Going Concern

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. To date, the Company has generated minimal revenue and has a working capital deficiency of $137,347 as of June 30, 2018. These factors, among others, 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. We will need to raise funds or implement our business plan to continue operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital sufficient to meet its minimal operating expenses by seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon among other things; its ability to successfully accomplish the plans described in the preceding paragraph and eventually begin operations in accordance with its business plan. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recent Accounting Pronouncements

From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.

U.S. RARE EARTH MINERALS, INC.

NOTES TO FINANCIAL STATEMENTS

AS AT JUNE 30, 2018

(UNAUDITED)

Note 2. Capital Stock

On February 27, 2015, the Company filed a Certificate of Change with the Nevada Secretary of State changing the number of authorized common shares from 6,000,000 to 300,000,000. The Company is currently authorized to issue 50,000,000 shares of its $0.001 par value preferred stock and 300,000,000 shares of its $0.001 par value common shares.

The Company formally filed a Certificate of Designation authorizing 500,000 of the 50,000,000 authorized preferred shares to be designated as $0.001 par value, Class “A” 6% Cumulative, Convertible Voting Preferred Stock with the Nevada Secretary of State on December 31, 2013.

The preferred stock ranks senior to the common stock of the Company in each case with respect to dividend distribution and distributions of assets upon liquidation, dissolution or winding up of the Company whether voluntary or involuntary.

These shares are issued as Class “A” 6% Cumulative, Convertible Voting Preferred Stock. Each share is valued at $1.00 per share for purposes of calculating interest and for conversion purposes and accrues interest at 6% per annum from the date of issue. Interest is cumulative for a maximum of two years and compounds annually. Interest accrued thereon shall become due and payable and shall be paid by the Company on or prior to thirty (30) days after the second anniversary of issue date and each consecutive two-year period thereafter.

As of June 30, 2018, and 2017, a total of $126,618 and $94,517 has not been declared by the Company, respectively.

Each share is convertible at any time from date of issue into five (5) shares of Company common stock. Each share shall be entitled to five (5) votes that may be cast by the holder at any shareholder meeting or event requiring a shareholder vote. All interest accrued to date of conversion will be paid by Company to holder within sixty (60) days of date of conversion by holder. These shares are callable by the Company at any time after three (3) years from date of issue at $1.00 plus accrued but unpaid interest unless previously converted.

As of June 30, 2018, and December 31, 2017, there were 440,500 shares of Class “A” 6% Cumulative, Convertible Voting Preferred Stock issued and outstanding, respectively.

Share issuances during the fiscal year ended December 31, 2017

On January 13, 2017, 4,350,000 common shares were cancelled. 

On April 25, 2017, the Company issued 8,100,000 shares of common stock to 3 directors and various consultants for past services rendered. The fair value of these shares is $0.02 per share based on the stock price; thus $162,000 was recognized as stock-based compensation. Also, on that date, the Company issued 3,000,000 shares of common stock to two consultants. The fair market value of these shares is $0.02 per share based on the stock price; thus $60,000 was recognized as stock-based compensation.

On November 18, 2017, the Company issued 67,500,000 shares of its unregistered Common Stock to a related party as consideration for acquisition of nine (9) Unpatented Placer Mining Claims valued at $675,000 by the Company and 3,000,000 shares of unregistered Common Stock as payment for outstanding accounts payable- related party valued at $30,000 and the remaining balance of $224,372 of the debt was forgiven and recorded to additional paid-in capital. 

Share issuances during the six months ended June 30, 2018

On April 12, 2018, the Company issued 845,454 shares of the Company’s common stock to a director and a former director and officer, in respect of $27,900 in outstanding advances and accrued interest thereon, as well as outstanding accounts payable. Included in the amount settled was $22,300 in advances payable, $4,500 in accounts payable and $1,100 in accrued interest. The fair market value of the shares on issue date was $0.018 per share, or $15,218, and therefore the Company has recorded forgiveness of debt in respect to the transaction of $12,682, which amount has been allocated to Additional Paid in Capital. 

On April 12, 2018, the Company issued a total of 1,174,546 shares of the Company’s common stock to a director and a former director for services rendered. The fair market value of the shares on the date of issue was $0.018 per share based on the Company’s quoted market price on OTCMarkets; therefore, the Company recorded $21,142 as stock-based compensation in respect of the issued shares.

U.S. RARE EARTH MINERALS, INC.

NOTES TO FINANCIAL STATEMENTS

AS AT JUNE 30, 2018

(UNAUDITED)

Note 2. Capital Stock (continued)

On May 16, 2018, the Company issued 3,000,000 shares of common stock to our Chairman, CFO and Secretary/Treasurer in respect of services rendered. The fair market value of the shares was $0.03 per share on the date of issue based on the Company’s quoted market price on OTCMarkets; therefore, $90,000 was recognized as stock-based compensation in respect of this share issuance.

As of June 30, 2018, and December 31, 2017, there were 110,436,350 and 105,416,350 shares of common stock issued and outstanding, respectively.

Note 3. Notes and Debentures Payable, Loan Payable

In 2009, the Company received multiple set of funds and the terms of each note payable are set forth: $5,000 note payable due upon demand and then in 2013 an $80,000 note bearing 6% per annum, simple interest, payable on or before August 23, 2013. The Company and note holders are in discussions with respect to the payoff of the notes as they both are in default.

We have two short-term loans totaling $25,000 at June 30, 2018 and December 31, 2017. These loans came due in 2012 and as of June 30, 2018 and December 31, 2017, are in default. These notes accrue interest at a rate of 10% per annum.

During the six months ended June 30, 2018 and 2017, the Company has recorded accrued interest of $3,900 and $3,900 respectively, in relation to the aforementioned loans, which amounts are included in the $28,476 and $24,576 as “Accrued interest” on the Company’s balance sheets.

Note 4. Related Party Transactions

The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.

As of June 30, 2018, and December 31, 2017, the Company had an outstanding payable of $9,198 to a company owned by the CEO for packaging services provided in year 2017.

On July 11, 2017 Nathan Marks was appointed as Director and his company is also a customer. The Company had no sales during the six month periods ended June 30, 2018 and 2017 to this company. 

The Company made payments of $700 to M. Strata, LLC during the six months ended June 30, 2018. As of June 30, 2018, and December 31, 2017, the Company owed M. Strata, LLC $nil and $700 related to tonnage fees, respectively.

On April 12, 2018, the Company accepted the resignation of CFO, Secretary/Treasurer and Director Donita R. Kendig. Concurrently, the Board of Directors authorized the issuance of a severance bonus for Ms. Kendig by way of 556,364 shares. (ref: Note 2). Concurrently, the Board of Directors appointed our Chairman and Director of the Company, Larry Bonafide to fill the position of Chief Financial Officer, and Secretary/Treasurer. Mr. Bonafide will also continue as Chairman.

On April 12, 2018, the Board of Directors authorized the issuance of 618,182 shares of the Company’s common stock to D. Quincy Farber, Officer and Director, for past services rendered. (ref: Note 2)

On May 16, 2018 the Company issued 3,000,000 shares of common stock to Mr. Larry Bonafide, our Chairman, CFO and Secretary/Treasurer in respect of services rendered. (re: Note 2)

Shareholder Advances

During the year ended December 31, 2017, two shareholders, officers and directors, advanced $22,700 to the Company to help pay for operating expenses. The advances have no specific terms of repayment.

During the six months ended June 30, 2018, the Company made payments of $400 to reduce the balance payable.

On April 12, 2018, the Company issued 845,454 shares of the Company’s common stock to two shareholders, officers and directors in respect of a cumulative amount of $27,900 in outstanding advances and accrued interest thereon. Included in the total amount settled was $22,300 in advances payable, $1,100 in accrued interest and $4,500 from accounts payable – related party. (ref: Note 2)

U.S. RARE EARTH MINERALS, INC.

NOTES TO FINANCIAL STATEMENTS

AS AT JUNE 30, 2018

(UNAUDITED)

Note 5. Commitments and Contingencies

The Company has been advised by the Bureau of Land Management that it must prepare and submit an amended plan of remediation for Eagle 4 and related areas where mining and related activities are being conducted and also will be required to submit an environmental assessment as well which will interrupt mining activities. The amended plan of remediation to be submitted may result in increasing the amount of the bond presently posted by the Company.  In addition, the Company has been advised by the BLM that it owes the BLM for materials removed from the mine site in prior years.  The amounts have not been determined.  Management estimates that the cost to be minimal and possibly zero. The Company and the BLM are waiting also for the Army Corps of Engineers to determine if a drainage ditch adjacent to the mine site is a stream, which is regulated by them.  As of June 30, 2018, no determination has been made by the Army Corps of Engineers. No communication has been received from the Army Corps of Engineers since May 2014.

The Company’s Attorney continues an on going dialogue with the Bureau of Land Management and hopes to reach an agreement over an alleged water diversion on U.S. Rare Earth Minerals, Inc. Panaca, NV BLM mine site. It is hoped that the Army Corps of Engineers will soon visit the site and render a decision.

Note 6. Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there are no additional subsequent events to disclose.

The following discussion should be read in conjunction with our unaudited financial statements and the notes thereto.  

Forward-Looking Statements

This quarterly report contains forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this report, the words “believe,” “anticipate,” “expect,” “estimate,” “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management’s current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: a general economic downturn; a downturn in the securities markets; federal or state laws or regulations having an adverse effect on proposed transactions that we desire to effect; Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement.

Overview

U.S. Rare Earth Minerals, Inc. (the “Company”), primary focus is on sales and distribution of certain products derived from the natural mineral deposits commonly known as Calcium Montmorillonite. These activities will be carried out through a web-based and distributor-based sales program directed at agricultural, animal and human uses of the products.

To the extent that the company requires additional capital for operations that it cannot derive from profits from sales, the Company plans to sell additional shares of unregistered preferred stock to raise money for additional operating capital. There is no guarantee the Company will be successful in selling additional shares to raise funds for additional operating capital, or if successful, it will raise the desired amount or be on terms and conditions which are beneficial to the Company.

Plan of Operation

The Company markets and sells the product under the name “EXCELERITE®”. The Company believes that EXCELERITE® has broad applications for plants, animals and humans. Specifically, the Company believes that by adding EXCELERITE® back into the soil, household and commercial farmers are replacing what has been lost by the use of man-made fertilizers over hundreds of years. Farmers using EXCELERITE® are seeing higher yields and larger and more nutritious crops. In addition, studies suggest that animals whose feed is supplemented with EXCELERITE® grow healthier and produce more. The naturally chelated nutrients and minerals in EXCELERITE® may enhance the production of enzymes. Without enzymes living things cannot build protein and other vital processes. “Micro-Excelerite ™”, a supplement form of EXCELERITE® is believed to rejuvenate the health of the human body in many ways. In addition to its natural supply of 78 essential nutrients and minerals, its ionic charge removes toxins as it works through the digestive tract.

The Company is marketing its products through various channels including but not limited to direct distribution, sales through third-party distributors and sales through the Company’s website. The Company has also undertaken to develop a network of distributors, both in the United States and internationally. The Company’s directors have been marketing the product to agricultural customers in Oregon, throughout the United States and internationally as well.

The Company has been engaged in various testing programs with several major agriculture firms for the past two years. Two of these firms are listed NYSE companies and do business worldwide. Results of these test on strawberries, carrots, peaches, soy beans, sweet potatoes and grapes have been very positive. EXCELERITE® has also been tested and proved to eliminate the odor from pig and cow manure which should lead to large orders from cattle farmers worldwide. The product is also being tested by poultry farmers.

Management believes that by partnering with these certain firms, long-term business relationships will develop, deriving substantial future product sales. The Company is bound by certain “Non-Disclosure Agreements” and therefore cannot divulge the names of partnering companies. Announcements of the Company’s test results and identity of its partners will be forthcoming when certain test results are completed and the parties agree on the content of the disclosure.

RESULTS OF OPERATIONS

The following table shows the financial data of the statements of operations of the Company for the three and six months ended June 30, 2018:

Three months ended June 30, 2018 and 2017:

The substantive reduction to operating loss was primarily due to lack of revenue generating business in the current quarter, resulting in a reduction to general, administrative and selling expenses over the comparative three month periods.

Gross revenue decreased period over period in the three months ended June 30, 2018 and 2017, and the cost of sales decreased accordingly. During the comparative three month periods ended June 30, 2018 and 2017 the Company recorded gross profits of $12,195 and $20,076 respectively. Profits from sales were not sufficient to meet our associated operating expenses.

Six months ended June 30, 2018 and 2017:

The substantive reduction to our operating loss period over period was primarily due to lack of revenue generating business in the period, resulting in a reduction to general, administrative and selling expenses over the comparative six month periods. Operating expenses period over period include stock based of compensation of $111,141 and $222,000 respectively for the six months ended June 30, 2018.

Gross revenue decreased period over period in the six months ended June 30, 2018 and 2017, and the cost of sales decreased accordingly. During the comparative six month periods ended June 30, 2018 and 2017 the Company recorded gross profits of $10,262 and $13,604 respectively. Profits from sales were not sufficient to meet our associated operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

The reduction to total current assets is predominantly related to collection of accounts receivable in the current period which amounts were used for ongoing operations and to reduce our outstanding accounts payable. Further the reduction to current liabilities is predominantly related to the settlement of certain outstanding accounts payable, accrued interest and shareholder advances by way of the issuance of common shares to reduce liabilities by $27,900. In respect of the settlement of debt in the amount of $27,900, the Company allocated $12,682 as forgiveness of debt due to the fact that the deemed value of the settlement shares was more than the fair market value on the date of issuance. This amount recorded as debt forgiveness was allocated to Additional Paid In Capital.

Going Concern

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. To date, the Company has generated minimal revenue and has a working capital deficiency of $137,347 as of June 30, 2018. These factors, among others, 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. We will need to raise funds or implement our business plan to continue operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital sufficient to meet its minimal operating expenses by seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon among other things; its ability to successfully accomplish the plans described in the preceding paragraph and eventually begin operations in accordance with its business plan. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our businesses operate in environments where we pay a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.

Revenue Recognition

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of finished products and the sale of product obtained from our mining contractor by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

The Company recognizes revenue when the earnings process is complete and persuasive evidence of an arrangement exists. This generally occurs for our recorded revenues when the sales transaction has been completed, payment has been collected and ownership of the product has been transferred to a third party for shipment.

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the six months ended June 30, 2018.

Stock Based Compensation

The Company has share-based compensation plans under which non-employees, consultants and suppliers may be granted restricted stock, as well as options to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost is measured by the Company at the grant date, based on the fair value of the award over the requisite service period. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants of stock options and stock to non-employees and other parties are accounted for in accordance with ASC 505.

The Company applies ASC 718 for options, common stock and other equity-based grants to its employees and directors. ASC 718 requires measurement of all employee equity-based payment awards using a fair-value method and recording of such expense in the consolidated financial statements over the requisite service period.  The fair value concepts have not changed significantly in ASC 718; however, in adopting this standard, companies must choose among alternative valuation models and amortization assumptions.  After assessing alternative valuation models and amortization assumptions, the Company will continue using both the Black-Scholes valuation model and straight-line amortization of compensation expense over the requisite service period for each separately vesting portion of the grant.  

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 is material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of June 30, 2018, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our internal controls are not effective for the following reasons: (i) there is an inadequate segregation of duties consistent with control objectives as management is comprised of only two persons, one of which is the Company’s principal executive officer and principal financial officer and, (ii) the Company does not have a formal audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.

In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with U.S. GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity to U.S. GAAP. We will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.

We would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible. In addition, we would need to expand our board to include independent members.

Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective controls over financial reporting. 

Changes in Internal Control over Financial Reporting

During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

PART II - OTHER INFORMATION

None.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item

There were no sales of equity securities sold during the period covered by this Report that were not previously included in a Current Report on Form 8-K other than:

On May 16, 2018, the Company issued 3,000,000 shares of common stock to our Chairman, CFO and Secretary/Treasurer in respect of services rendered. The fair market value of the shares was $0.03 per share on the date of issue based on the Company’s quoted market price on OTCMarkets; therefore, $90,000 was recognized as stock-based compensation in respect of this share issuance.

All stock issuances discussed in this section under the heading Recent Sales of Unregistered Securities, were exempt from the registration requirements of Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of the same Act since the issuances of the shares were to persons well known to the Company and did not involve any public offerings. 

None.

None.

The Board of Directors, on April 12, 2018, accepted the resignation of CFO, Secretary/Treasurer and Director Donita R. Kendig.

On April 12, 2018, the Board of Directors of the Company elected current Chairman and Director of the Company, Larry Bonafide to Chief Financial Officer, Secretary/Treasurer. Mr. Bonafide will also continue as Chairman.

Mr. Bonafide has served as a Director of the Company since his election to the Board on February 10, 2014.

SIGNATURES

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