ITEM 1. DESCRIPTION OF BUSINESS.
Statements in this Form 10-K Annual Report may be "forward-looking statements." Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this Form 10-K Annual Report, including the risks described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in other documents which we file with the Securities and Exchange Commission.
In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, competition, government regulations and requirements and pricing, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-K Annual Report.
DESCRIPTION OF BUSINESS
Overview
Optec International, Inc. (Formerly Green Meadow Products, Inc. "the Company", "GMP", "we", "us" or "our") was incorporated under the laws of the State of Wyoming on June 22, 2012.
The Company distributes products in what we consider to be the “Green Sector” or “environmentally friendly sector”. In the last year the Company has focused its resources towards the sales of The Optimized Fuel Maximizer, an on demand technology designed for computer controlled gasoline and diesel engines for improved fuel efficiency and performance while simultaneously reducing harmful emissions. We believe that the technology can reduce greenhouse gas emissions which in turn could conceivably aid in making the air much healthier in our cities. (For further information on Optec Products acquired-www.optecmpg.com).
On June 4, 2018 the Company entered into an Exclusive Licensing Agreement with Optimized Fuel Technologies, a related party, for the right to exclusively distribute and sell the Optimized Fuel Maximizer internationally, with the exception of the United States and Canada. Consideration of $501,500 was paid for the licensing right in the form of one million five hundred thousand (1,500,000) shares of the Company’s common shares valued at $.001 per share which were authorized to be issued to Optimized Fuel Technologies; in addition to five hundred thousand dollars ($500,000) to be paid over the course of 24 months from the date herein; of which the Company has paid $109,000.
On June 20, 2018 the Company entered into an Exclusive Licensing Agreement Addendum with Optimized Fuel Technologies for the right to exclusively sell the Optimized Fuel Maximizer worldwide. On June 4, 2018, the Company had entered into an Exclusive Licensing Agreement with Optimized Fuel Technologies for the right to exclusively sell the Optimized Fuel Maximizer internationally, with the exception of the United States and Canada; this agreement extends exclusive marketing right to include North America and Canada. Consideration of $1,000 was paid for the licensing rights under the addendum in the form of one million (1,000,000) shares of the Company’s common shares valued at $.001 per share which were authorized to be issued to Optimized Fuel Technologies.
On August 8, 2018 Optimized Fuel Technologies, a related party, entered into a contract with a company that desired to purchase the Optimized Fuel Maximizer on a manufacturer direct basis. As the Company owns the exclusive licensing rights to sales of the Optimized Fuel Maximizer; per the Royalty agreement dated August 27, 2018 the Company agreed to the acceptance of royalty revenue generated by sales which are made on a manufacturer direct basis.
We are currently expanding our marketing efforts and sales of the Optimized Fuel Maximizer units.
Previously the Company had engaged in the sales of pet pain relief products and licenses for the formulation of pet products. While the Company still retains ownership of the pain relief product for pets, that sector of business is no longer the focal point of the Company. The company expects to sell off the formulation for the pet pain relief product in the next quarter.
Optimized Fuel Maximizer Product
Sales and Marketing
In the last year we have marketed the product and have done marketing testing with some minimal sales of the Optimized Fuel Maximizer in order to aid the manufacturer in the final product development. In that process we have sold $85,100 of product internationally in the last year for vehicles. Additionally, the product was tested on truck refrigeration systems, generators and large off road diesel trucks in order to best determine our marketing strategies moving forward.
The product has been updated and is currently being marketed for:
Passenger Vehicles (cars, small trucks and SUVs)
Intermediate / Medium duty Trucks
Off-Road equipment as well as Generator systems
Heavy Duty Diesel On-Road Vehicles and Transportation Refrigeration Units
Our marketing efforts target larger distributors of automotive products as well as larger fleets of vehicles such as :
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Automotive parts stores
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Police Forces
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Fire Departments
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UPS
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Federal Express
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DHL
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Knight Trucking fleets
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And additional car or truck fleets both internationally and nationally
Product Description
Image of different models
The Optimized Fuel Maximizer, is an on demand technology designed for computer controlled gasoline and diesel engines for improved fuel efficiency while simultaneously reducing harmful emissions and enhancing performance.
The Optimized Fuel Maximizer is manufactured by Optimized Fuel technologies in the USA.
The product is a small, non-intrusive system that connects to an engines fuse box and source of vacuum. It requires no tanks or water reservoirs. By definition the Optimized Fuel Maximizer is a hydrogen fuel cell and it’s function is to emit a micro amount of hydrogen and cooler air into the combustion chamber to complete the combustion of the fuel. The technology is fully patented by the manufacturer and has undergone rigorous third-party testing to support performance claims and engine safety. The cost for installation of the system varies depending on the type of vehicle or generator it is being added to.
The product was designed for three different applications
Unit Type
Application
PSV38D
Diesel passenger vehicles and light duty trucks
PSV38G
Gasoline passenger vehicles and light duty trucks
MD374
Diesel Medium Duty weight class vehicles
MD374G
Gasoline Medium Duty weight class vehicles such as delivery vans
HD386
Heavy Duty Diesel engines including on-road and off-road applications
TRU386
Transportation Refrigeration Units
The state of California requires all aftermarket parts to be tested and approved for the legal sale and installation. The Optimized Fuel Maximizer has been in testing for three years and has received an executive order for the legal sale of the product for various diesel engines. Currently the Optimized Fuel Maximizer is unavailable in the state of California for gasoline vehicles but is in the application process of obtaining the addition of these engines.
Industry Overview
The Global Automotive aftermarket size in 2016 was $640B+ and there is a 4.7% market growth rate expected to reach $847.15B by 2022
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“Asia-Pacific is anticipated to be the fastest growing market with a CAGR of about 6.5%.
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In Europe, products which enhance the performance and agility features of the vehicle are expected to show highest growth. There are 751.4M+ motor vehicles in operation outside of the U.S and 29M number of commercial vehicle sales globally in 2017.
(*Source the Global Automotive Aftermarket Products market by Research and Market Reports)
With the ever-tightening emission and fuel regulations on auto manufacturers, coupled with the increase in demand by consumers for a higher performing vehicle, there is a pressing need for innovative technologies like the Optimized Fuel Maximizer to fulfill both demands.
Beyond vehicle manufactures, there is an extremely high demand from fleet operators, municipalities, and consumers to save fuel and reduce emissions with their existing engines. The cost for retrofitting or buying new hybrid or electric engines are just too high for many business and consumers, and there is a desperate need to reduce operation cost and comply with emission standards.
Money and business aside, the public is demanding cleaner, safer air because air pollution is steadily getting worse in many parts of the world. Approximately seven million people are dying every year due to poor air quality and there has never been more of a need for technology like OPTEC. (Source: World Health Organization) As a global population, there is a huge problem with pollution and air quality. Increasingly more countries are recognizing this problem at a rapid rate and, in turn, seeking innovative technologies like the Optimized Fuel Maximizer.
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The recognition of this problem, caused predominantly by fossil fuel usage, are causing countries to work together to reduce emissions.
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OPTEC International works tirelessly to be in close contact with these countries to discover solutions that will hopefully become a major breakthrough for generations to come.
Automotive Aftermarket Industry
The global automotive aftermarket industry is expected to reach $722.8 billion by 2020. Today’s consumers are keeping their vehicles longer and are more aware of the importance of preventive maintenance and scheduled servicing to maximize the lifetime value of their vehicles. This rising demand for aftermarket parts and services is spurring new growth and revenue opportunities for a wide range of businesses operating in the automotive aftermarket industry.
Trends and Statistics:
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The average age of the U.S. vehicle fleet has increased 17% in the last ten years.
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The average length of vehicle ownership for new and used vehicles has increased 60% in the last ten years.
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75% of aftermarket auto repair is performed by independent auto repair shops, while 25% of the business lives with dealerships.
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There’s a trend toward large franchise auto repair businesses, which have smaller shops rolling up into them. That’s a good opportunity for profitable businesses on the service/seller-side.
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The aftermarket world is going online, and the marketplace is changing. Parts are being sold online, service is being sold online.
(Source: May 24, 2018-V12DATA- https://www.v12data.com/blog/a-look-at-trends-and-statistics-in-the-automotive-aftermarket-industry-2017/)
Industry Insights
The global automotive aftermarket size was valued at USD 335.23 billion in 2016 and is projected to gain traction over the forecast period. The market is majorly driven by automobile drivers looking to enhance vehicle performance in terms of exhaust, sound, speed, and appearance, among other aspects.
Regional regulatory authorities, such as Japanese Automobile Sports Muffler Association (JASMA) and the U.S. Environmental Protection Agency, monitor built-up standards and environmental impacts associated with automotive component functioning. Noise emission levels associated with modern-day automotive resonators and mufflers in automotive exhaust systems is one such example.
The automotive aftermarket service channel comprises raw material suppliers, tier 1 distributors, automobile exhaust hubs/manufacturing units, aftermarket units comprising jobbers, and repair shops, among others. Repair centers are the important stakeholders in the service channel. Source: Grand View research https://www.grandviewresearch.com/industry-analysis/aftermarket-automotive-parts-market
Competition
To our knowledge we do not have any direct competitors in the space that can provide the benefits of emission reduction, fuel savings, and an increase in performance. Though there have been past attempts at small hydrogen generators, all have required water reservoirs or hydrogen storage tanks. The Optimized Fuel Maximizer does not require either of these and successfully achieves results with just a micro amount of hydrogen. The hydrogen is created from ambient air and this is what makes it unique.
Regulation
Our Company is regulated by governmental authorities in the jurisdictions in which we operate. Because of our international operations, we must comply with diverse and evolving regulations. Regulation relates to, among other things, management, licensing, foreign investment, use of confidential customer information and content. Our failure to comply with all applicable laws and regulations could result in, among other things, regulatory actions or legal proceedings against us, the imposition of fines, penalties or judgments against us or significant limitations on our activities. In addition, the regulatory environment in which we operate is subject to change. New or revised requirements imposed by governmental authorities could have adverse effects on us, including increased costs of compliance. Changes in the regulation of our operations or changes in interpretations of existing regulations by courts or regulators or our inability to comply with current or future regulations could adversely affect us by reducing our revenues, increasing our operating expenses and exposing us to significant liabilities. Our business involves risks of liability associated with the Health and Pet industries, which could adversely affect our business, financial condition or results of operations. As such, we may face potential liability for any of:
defamation;
invasion of privacy;
copyright infringement;
actions for royalties and accountings;
trademark misappropriation;
trade secret misappropriation;
breach of contract;
negligence; and/or
other claims based on the nature and content of the materials distributed.
These types of claims have been brought, sometimes successfully, against merchandisers, online services and other manufacturers, developers and distributors of vehicle parts related products. We could also be exposed to liability in connection with material available through our Internet sites. We currently do not have limited liability insurance and have no current plans to obtain such insurance which could have a material adverse effect on us.
Intellectual Property & Proprietary Rights
The Company owns the worldwide licensing rights for the Optimized Fuel Maximizer product line. The manufacturer of the Optimized Fuel maximizer is Optimized Fuel Technologies. Optimized fuel Technologies owns the intellectual property and patent for the Optimized Fuel Maximizer, and has been issued the United States patent for the product. In addition, they have filed and continue to file for international patent protection in various countries around the world. Per Agreement, the Company will not market the Fuel Maximizer product in any country unless there is patent and intellectual property protection. We regard substantial elements of our businesses as proprietary and we shall attempt to protect them by relying on copyright, trademark, service mark and trade secret laws, restrictions on disclosure and transferring title and other methods.
On August 8, 2018 Optimized Fuel Technologies, a related party, entered into a contract with a company that desired to purchase the Optimized Fuel Maximizer on a manufacturer direct basis. As the Company owns the exclusive licensing rights to sales of the Optimized Fuel Maximizer; per the Royalty agreement dated August 27, 2018 the Company agreed to the acceptance of royalty revenue generated by sales which are made on a manufacturer direct basis.
Employees
We are a new, developing company and currently have only one full time employees, Peter Sollenne our CEO, CFO, board Member and Secretary.
ITEM 1A.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide the information required by this section.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY CORPORATE INFORMATION
Office and Facilities
The Company currently has an office & warehouse lease agreement for space located at 2721 West Loker Avenue, Carlsbad, CA 92010. Our telephone number at that address is (760) 444-5566. On May 1, 2018 the Company entered an office lease to sublet warehouse and office space from Optimized Fuel Technologies, a related party. The term of the lease is for 13 months at a monthly rent of $2,500 per month.
WEBSITE POSTING OF SEC FILINGS
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available, free of charge, on our website and can be accessed on the SEC's Edgar database. Further, a copy of this annual report on Form 10-K is located at the SEC's Public Reference Room at 100 F Street, NE, Washington, D. C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov.
Bankruptcy or Receivership or Similar Proceedings
None.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We were not subject to any legal proceedings during the twelve months ended June 30, 2018 or 2017 and none are threatened or pending to the best of our knowledge or belief.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our Company.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER REPURCHASES OF EQUITY SECURITIES
Only a limited market exists for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder in all likelihood will be unable to resell his securities in our company. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.
Our company’s securities are traded on the “OTCQB” operated by the OTC Markets Group under the symbol “OPTI”.
As of June 30, 2018, we had 17,829,947 shares of our common stock outstanding and the number of stockholders of record of our common stock was 42.
DIVIDENDS
We have never declared or paid any cash dividends on our common stock.
RECENT SALES OF UNREGISTERED SECURITIES
In the year ended June 30, 2018, 85,000 unregistered shares were sold through a private placement memorandum. The shares were sold at $2.00 per share to four shareholders.
PURCHASES OF EQUITY SECURITIES BY THE REGISTRANT AND AFFILIATED PURCHASERS
None.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to a "smaller reporting company" as defined in Item 10(f)(1) of SEC Regulation S-K.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This Management's Discussion and Analysis or Plan of Operation contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases, you can identify forward-looking statements by the use of words such as "may", "will", "should", "anticipate", "believe", "expect", "plan", "future", "intend", "could", "estimate", "predict", "hope", "potential", "continue", or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including, but not limited to, the matters discussed in this report under the caption "Risk Factors". We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We undertake no obligation to publicly update any forward looking-statements, whether as a result of new information, future events or otherwise.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this report.
The following table provides selected financial data about us for the fiscal years ended June 30, 2018 and 2017. For detailed financial information, see the audited Financial Statements included in this report.
Optec International, Inc. (Formerly Green Meadow Products, Inc. "the Company", "we", "us" or "our") was incorporated under the laws of the State of Wyoming on June 22, 2012.
The Company’s goal from the outset was to establish itself as a “Green” Company where our focus would be on products that were environmentally friendly. The Company currently distributes products which are “environmentally friendly”. In the last year the Company has focused its resources towards the sales of The Optimized Fuel Maximizer, an on demand technology designed for computer controlled gasoline and diesel engines for improved fuel efficiency and performance while simultaneously reducing harmful emissions. We believe that the technology can reduce greenhouse gas emissions which in turn could conceivably aid in making the air much healthier in our cities. (For further information on Optec Products acquired-www.optecmpg.com).
Plan of Operation
Our future plan is to expand our sales & marketing of the Optimized Fuel Maximizer, concentrating primarily in the North America region, and followed up by expansion into other geographic areas subsequent to locating and contracting with large distributors that already operate in the automotive aftermarket arena. We will also continue to work closely with and support the manufacturer to obtain additional certifications from the California Air Resources Board (CARB). Currently there are two (2) major tests in progress.
Marketing and Sales efforts:
Successful implementation of our business strategy depends on factors specific to the further development of our products, additional financing through equity or debt sources and numerous other factors that may be beyond our control. Adverse changes in the following factors could undermine our business strategy and have a material adverse effect on our business, financial condition, and results of operations and cash flow:
-the competitive environment in the aftermarket automotive parts sector that may force us to reduce prices below the optimal desired pricing level or increase promotional spending;
-the ability to anticipate changes in consumer preferences and to meet customers' needs for trading products in a timely cost effective manner; and
-the ability to establish, maintain and eventually grow market share in a competitive environment.
Significant Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experiences and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Other Intangible Assets
Intangible assets other than goodwill primarily represent acquired intangible assets including licenses, patent costs, acquired technology, internally developed technology, customer relationships, non-compete agreements, trade names and trademarks. Intangible assets with finite lives are amortized using the straight-line method over their estimated useful life, which is determined by identifying the period over which most of the cash flows are expected to be generated.
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For intangibles with finite lives, we review the carrying amounts for potential impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Examples of such a change in circumstances include a significant decrease in selling price, a significant adverse change in the extent or manner in which an asset is being used or a significant adverse change in the legal or business climate. In evaluating recoverability, we group assets and liabilities at the lowest level such that the identifiable cash flows relating to the group are largely independent of the cash flows of other assets and liabilities. We then compare the carrying amounts of the assets or asset groups with the related estimated undiscounted future cash flows. In the event impairment exists, an impairment charge is recorded as the amount by which the carrying amount of the asset or asset group exceeds the fair value. Fair value is determined by reference to estimated selling values of assets in similar condition or by using a discounted cash flow model. In addition, the remaining amortization period for the impaired asset would be reassessed and, if necessary, revised.
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No impairment charges for intangible assets with finite lives were recorded for the years ended June 30, 2018 and 2017.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification No. 605, "Revenue Recognition" ("ASC-605") ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
The Company's revenues have been generated primarily through the sales of our Optimized Fuel Maximizer and sublicense and distribution agreements related to our PawPal product and our pain relief products. The terms of these agreements generally consist solely of upfront, nonrefundable payments for licensing and distribution rights. Revenues from non-refundable licensing and distribution fees are recognized upon receipt of the payment if the license has stand-alone value and we do not have ongoing involvement or obligations.
For the year ended June 30, 2018 terms of sales of the optimized fuel maximizer consisted of sales with extended terms for payment, however revenue was recorded upon the invoice being sent with products that was shipped. For the year ended June 30, 2017, all license payments met the above criteria or in the case of one contract, the only continuing involvement was to sell our products to the distributor at pricing that is consistent with market transactions, thereby allowing for the recognition of revenue for the licensing and distribution arrangements upon receipt.
When non-refundable license fees do not meet this criteria, the license revenues are recognized over the expected period of performance. We periodically review for any expected period of substantial involvement under the agreements that provide for non-refundable up-front payments and license fees. If ever applicable, we will adjust the amortization periods when appropriate to reflect changes in assumptions relating to the duration of our expected involvement.
In the years ended June 30, 2017, we also engaged in a marketing test of various dog treats formulated by us, through street fair venues. We recognized revenue upon receipt from sales.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires us to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
Results of Operations
For the Year Ended June 30, 2018 Compared to the Year Ended June 30, 2017.
Revenue
For the year ended June 30, 2018, we recognized revenues of $91,105 compared with $24,200 of revenue for the year ended June 30, 2017. During the year ended June 30, 2018, we recognized $85,100 in sales of the Optec devices and $4,500 in the sale of a sub license agreements of our Green Meadow PR formula and $1,505 in other sales compared to year ended June 30, 2017, where we recognized $12,000 in sales of the Optec devices and $12,200 from the sale of sub license agreements of our Green Meadow PR formula.
Cost of Sales
For the year ended June 30, 2018, we recognized cost of goods of $58,360 relating to the Optec product which we sold for $85,100 in the period, compared to year ended June 30, 2017, we recognized cost of goods of $7,000 relating to the Optec product which we sold for $12,000 in the period,
Gross Profit
For the year ended June 30, 2018, we recognized a gross profit of $32,745 compared with the year ended June 30, 2017, we recognized a gross profit of $17,200. The increase in gross profits is due to an increase in Optec Product sales for the year end June 30, 2018.
Operating Expenses
For the year ended June 30, 2018, we incurred total operating expenses of $204,328 other expenses incurred for the twelve-month period ended June 30, 2018 included a change in fair value of derivative liabilities of $769,394 and interest on convertible notes $379,897 for a total expense of $1,353,619 compared to the year ended June 30, 2017 we incurred total operating expenses of $27,211 before tax. Increases in expenses for the year ended June 30, 2018 is attributable to costs associated with the sales of the Optimized Fuel Maximizer units and the costs associated with three convertible notes which the Company issued.
During the year ended June 30, 2018, we incurred professional fees of $37,276 which were attributable to expenses relating to our SEC filings and accounting costs, formula amortization of $3,326 and web site amortization of $4,250, advertising and marketing expenses of $7,745, consulting fees of $55,255, bad debt expense of $85,100, commission of $5,000, rent expense of $5,000, general and administrative costs of $1,376 by comparison to the year ended June 30, 2017, where we incurred professional fees of $16,486 which were attributable to expenses relating to our SEC filings and accounting costs, amortization of $4,076, advertising and marketing expenses of $5,075, consulting fees of $1,500 and general and administrative costs of $74.
Net Income (Loss)
During the year ended June 30, 2018, we incurred a net loss of $1,320,874 compared to a net loss of $10,011 during the year ended June 30, 2017 due to the factors discussed above.
Liquidity and Capital Resources
For Year Ended June 30, 2018 Compared to Year Ended June 30, 2017
As of June 30, 2018, the Company had cash on hand of $30,799, total assets of $626,369, total liabilities of $1,769,055 and stockholders' equity (deficit) of $(1,142,686) compared to June 30, 2017 the Company had cash on hand of $342, total assets of $17,688, total liabilities of $7,000 and stockholders' equity of $10,688. The change in shareholders' equity at the year ended June 30, 2018 was largely attributable to operating losses incurred in the period and non-cash issuance of common stock for licensing rights.
Operating Activities
During the year ended June 30, 2018, we used $281,810 cash in operating activities compared to $8,635 cash used in operating activities during the year ended June 30, 2017. During the year ended June 30, 2018, we incurred a loss of $1,320,874 of which $7,576 related to noncash amortization, amortization of debt discount of $276,413, bad debt of $85,100, changes in fair value of derivative liability of $769,394 increased our balance of accounts payable by $53,760, decrease in accounts receivable by $80,400, decrease to cash for inventory by $85,000, decrease to cash for prepaid salary by $3,000, increased accrued interest by $3,221, and increase in stock issued for services $12,000. By comparison during the year ended June 30, 2017, we incurred a loss of $10,011, of which $4,076 related to noncash amortization, increase in accounts payable by $2,000 and an increase in accounts receivable by $4,700.
Investing Activities
For the year ended June 30, 2018, we used $109,000 cash in investing activities by increased notes receivables to Optimized Fuel Technologies, a related party. The note receivable was later reduced in a non-cash transaction to offset a note payable to Optimized Fuel Technologies, a related party. There has been no cash generated from or used in investing activities during the year ended June 30, 2017.
Financing Activities
During the year ended June 30, 2018 we had proceeds from issuance of notes payable for $482,000, loan from related party of $100, proceeds from sale of capital stock of $170,000, Stock offering costs of $17,000 and principal payments on debt of $213,833. During the year ended 2017, we neither generated nor used any funds in financing activities.
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at June 30, 2018, the Company had yet to establish a proven, reliable, recurring source of revenue to fund its ongoing operating costs and with insufficient funds to fully implement its proposed business plan. This raises substantial doubt about the Company's ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is currently conducting an offering of its debt or equity securities to obtain additional operating capital. The Company is dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.
The Company has no current off balance sheet arrangements and does not anticipate entering into any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition.
Related parties
We entered into an agreement with our President, Peter Sollenne, for a salary to be paid in the amount of $3,000 per month.
On June 4, 2018 the Company entered into an Exclusive Licensing Agreement with Optimized Fuel Technologies for the right to exclusively distribute and sell the Optimized Fuel Maximizer internationally, with the exception of the United States and Canada. Consideration of $501,500 was paid for the licensing right in the form of one million five hundred thousand (1,500,000) shares of the Company’s common shares valued at $.001 per share which were authorized to be issued to Optimized Fuel Technologies; in addition to five hundred thousand dollars ($500,000) to be paid over the course of 24 months from the date herein; of which the Company has paid $109,000.
On June 20, 2018 the Company entered into an Exclusive Licensing Agreement Addendum with Optimized Fuel Technologies for the right to exclusively sell the Optimized Fuel Maximizer worldwide. On June 4, 2018, the Company had entered into an Exclusive Licensing Agreement with Optimized Fuel Technologies for the right to exclusively sell the Optimized Fuel Maximizer internationally, with the exception of the United States and Canada; this agreement extends exclusive marketing right to include North America and Canada. Consideration of $1,000 was paid for the licensing rights under the addendum in the form of one million (1,000,000) shares of the Company’s common shares valued at $.001 per share which were authorized to be issued to Optimized Fuel Technologies.
On August 8, 2018 Optimized Fuel Technologies, a related party, entered into a contract with a company that desired to purchase the Optimized Fuel Maximizer on a manufacturer direct basis. As the Company owns the exclusive licensing rights to sales of the Optimized Fuel Maximizer; per the Royalty agreement dated August 27, 2018 the Company agreed to the acceptance of royalty revenue generated by sales which are made on a manufacturer direct basis.
On May 1, 2018 the Company entered an office lease to sublet warehouse and office space from Optimized Fuel Technologies, a related party. The term of the lease is for 13 months at a monthly rent of $2,500 per month.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
FINANCIAL STATEMENTS ITEM 8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes or disagreements with Accountants.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of June 30, 2018, our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms due to material weaknesses in our internal controls described below.
Management's Annual Report on Internal Control Over Financial Reporting.
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Despite these controls, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies, like us, face additional limitations. Smaller reporting companies employ fewer individuals and can find it difficult to employ resources for complicated transactions and effective risk management. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of June 30, 2018 based on the criteria established in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that as of June 30, 2018, our internal control over financial reporting was not effective based on those criteria.
This annual report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act that permit us to provide only management's report in this annual report.
Inherent Limitations Over Internal Controls.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. 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. Our control systems are designed to provide such reasonable assurance of achieving their objectives. 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Management notes the following material weaknesses in internal control: lack of segregation of duties due to limited resources; lack of audit committee; and lack of documentation of internal control process and procedures.
Changes in Internal Control Over Financial Reporting.
We have made no change in our internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of the Registered Public Accounting Firm.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report on Form 10-K.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
Executive Compensation
Summary Compensation Table
(1)
Stan Windhorn, Director and CEO, CFO and Secretary since inception-resigned as Director and CEO, CFO on May 24, 2017.
(2)
Peter Sollenne Director and CEO on May 24, 2017
(3)
Peter Sollenne, Director and CEO was issued 6,005,000 shares of common restricted stock for services
(4)
Marcus Pawson, Vice President of International Sales, was issued 4,945,000 shares of common restricted stock for services
Option Grants Table. There were no individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table through June 30, 2018.
Compensation of Officers and Directors
On October 4, 2017 we entered into an Executive employment Agreement with Peter Sollenne, CEO, whereby compensation shall be at the rate of $3,000 per month plus a signing bonus of $12,000 which was paid in the form of 12,000,000 shares of restricted common shares of the Company at ($.001per share). On June 20, 2018 6,000,000 shares were cancelled and an additional 238 shares were issued.
On October 4, 2017 four million (4,000,000) shares were authorized to be issued to Marcus Pawson as Vice President of International Sales for services valued at $4,000 ($.001 per share). On June 20, 2018 two million (2,000,000) shares were issued to Marcus Pawson for services valued at $2,000 ($.001 per share).
We did not accrue or pay any salaries during the year ended June 30, 2017. We entered into an agreement on January 15, 2015 with, Stanley Windhorn, who was DIRECTOR, CEO, CFO and SECRETARY until May 24, 2017 at which time he resigned as CEO, Director and CFO but remained as Secretary, for a salary to be paid in the amount of $2,000 per month. For the three months ended March 31, 2015, $6,000 was paid to Mr. Windhorn per the agreement. Subsequently we determined that the revenues generated by the Company were not sufficient to support operations and a salary. We entered into a new employment agreement on April 1, 2015 which supercedes any past agreements whereby Stan Windhorn under the new agreement will be awarded compensation at the discretion of the Company’s board. The company has not incurred any salary under this new agreement during the year ended June 30, 2017.
ITEM 11.
ITEM 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive Officers and Directors
The following table and subsequent discussion contains the complete and accurate information concerning our directors and executive officers, their ages, term served and all of our officers and their positions, who will serve in the same capacity with us upon completion of the offering.
There are no other persons nominated or chosen to become directors or executive officers nor do we have any employees other than above.
Stanley Windhorn has served as the Company's CEO, CFO, Secretary and Director since June 22, 2012. On May 24, 2017, he resigned as Director, CEO and CFO and remained as Secretary of the Company. Stanley Windhorn through his ventures has specialized in marketing to both consumers and businesses, both nationally as well as internationally. He is the Managing Partner and founder of Univative Concepts which is a marketing Company which he has operated since 2005. He was the owner of several Fitness 19 franchises which were sold in 2011. He serves as the Regional Manager for the automobile technology sales company, True Car. We believe his marketing skill sets will bring a distinct advantage to the Company's ability to move forward.
Mr. Sollenne, was appointed as Director, CEO and CFO on May 24, 2017. Mr. Sollenne age 68, has served as the President and CFO of Blackhawk Wealth Group, Inc. a financial advisory company from 2008 to the present where he administered the strategic financial planning for numerous companies, inclusive of the medical device industry, oil & gas industry and the international commodity trading arena, to name a few. From 2003 to 2008 Mr. Sollenne served as the CEO and CFO of IT&E International, Inc. an international life sciences services company serving the Pharmaceutical, Biotech, Biopharma and clinical research industries. From May 2000 to December 2003, Mr. Sollenne was President and Chief Executive Officer at Fast Break Growth, Inc. a strategic management consulting and business solutions company. From December 1998 to May 2000, Mr. Sollenne was Chief Executive Officer, President and Chief Operating Officer of re-Solutions, Inc., an information technology professional services company. Mr. Sollenne received his Bachelors of Science in Accounting/Business Administration from Boston College and is a CPA.
Mr. Pawson was appointed as Director, and Vice President of International Distribution on June 4, 2018. Mr. Pawson age 45, has an extensive background in production and distribution of tooling, generators, and all types of combustion engines and accessories, all in the United Kingdom. His experiences have been to Manage production & service facilities and also has experience in International Distribution. He was Branch Manager for Hire Station from 1996-2006; then became Territory Manager for Speedy Hire for over 11 years, overseeing 10 branches and the entire South Yorkshire, both large manufacturers and distributors of production tooling, generators, excavators and related equipment. Previous to this appointment, he served with Optimized Fuel Technologies as a lead engineer in the testing and development of the Fuel Maximizer product line. He was instrumental in the development of the Fuel Maximizer products, and was the key engineer on the Motor Cycle Fuel Maximizer. He subsequently resigned from Optimized Fuel Technologies when he was appointed to the Board and Vice President of International Distribution for OPTEC International, Inc.
Our directors will hold office until the next annual meeting of shareholders and the election and qualification of their successors. Directors receive no compensation for serving on the board of directors other than reimbursement of reasonable expenses incurred in attending meetings. Officers are appointed by the board of directors and serve at the discretion of the board.
No officer, director, or persons nominated for such positions and no promoters or significant employee of GMP has been involved in legal proceedings that would be material to an evaluation of officers and directors.
Indemnification of Directors and Officers
Except as permitted by the Wyoming Revised Statutes, the Company's Articles of Incorporation do not provide for any additional or different indemnification procedures. At present, there is no pending litigation or proceeding involving a director, officer or employee of the Company regarding which indemnification is sought, nor is the Company aware of any threatened litigation that may result in claims of indemnification. The Company has not obtained director's and officer's liability insurance, although the board of directors of the Company may determine to investigate and, possibly, acquire such insurance in the future.
Conflict of Interest - Management's Fiduciary Duties
Our directors and officer or may become, in their individual capacity, officers, directors, controlling shareholders and/or partners of other entities engaged in a variety of businesses.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
None
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 2018, information concerning ownership of our securities by:
-
Each person who owns beneficially more than five percent of the outstanding shares of our common stock;
-
Each person who owns beneficially more than five percent of the outstanding shares of our preferred stock;
-
Each director;
-
Each named executive officer; and
-
All directors and officers as a group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of June 30, 2018, certain information with respect to the beneficial ownership of the common stock of our Company by each person who we know to be beneficial owner of more than 5% of any class or series of our capital stock, each of the directors and executive officers individually, and all directors and executive officers as a group. Unless otherwise indicated, each person named in this table has sole voting and investment power with respect to the shares beneficially owned.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We entered into an agreement on January 15, 2015 with our former President, Stanley Windhorn, for a salary to be paid in the amount of $2,000 per month. For the three months ended March 31, 2015, $6,000 was paid to Mr. Windhorn per the agreement. Subsequently we determined that the revenues generated by the Company were not sufficient to support operations and a salary. We entered into a new employment agreement on April 1, 2015 which supersedes any past agreements whereby Stanley Windhorn under the new agreement will be awarded compensation at the discretion of the Company’s board. The Company has not incurred any salary under this new agreement since April 1, 2015 to the date of the issuance of this Form 10K.
On October 4, 2017 we entered into an Executive employment Agreement with Peter Sollenne, CEO, whereby compensation shall be at the rate of $3,000 per month plus a signing bonus of $12,000 which was paid in the form of 12,000,000 shares of restricted common shares of the Company at ($.001 per share). On June 20, 2018 6,000,000 shares were returned for cancellation and 238 shares were issued.
On October 4, 2017 four million (4,000,000) shares were authorized to be issued to Marcus Pawson as Vice President of International Sales for services valued at $4,000 ($.001 per share). On June 20, 2018 two million (2,000,000) shares were issued to Marcus Pawson for services valued at $2,000 ($.001 per share).
On November 1, 2017 the board of Directors approved a revolving loan receivable with a three year maximum term and a limit of $250,000 to Optimized Fuel Technologies, a related party and the manufacturer of the Fuel Maximizer units we sell. The loan is intended to have various advances at a 0% interest rate for the first 90 days with the interest rate subject to adjustment thereafter. $109,000 loan was made to facilitate the additional CARB (California Air Resources board) certifications, Patents expanded, and other certifications needed, which are required for both domestic and international markets. $109,000 was paid in full as an other receivable to Optimized Fuel Technologies, a related party, which was credited against a $500,000 note payable for licensing rights.
The Company currently has an office & warehouse lease agreement for space located at 2721 West Loker Avenue, Carlsbad, CA 92010. Our telephone number at that address is (760) 444-5566. On May 1, 2018 the Company entered an office lease to sublet warehouse and office space from Optimized Fuel Technologies, a related party. The term of the lease is for 13 months at a monthly rent of $2,500 per month.
On June 4, 2018 One million five hundred thousand (1,500,000) shares of common stock authorized and issued to Optemized Fuel Technologies for International Exclusive Licensing and on June 20, 2018 one million (1,000,000) shares of common stock were authorized to be issued to Optemized Fuel Technologies for North America Licensing.
On August 8, 2018 Optimized Fuel Technologies, a related party, entered into a contract with a company that desired to purchase the Optimized Fuel Maximizer on a manufacturer direct basis. As the Company owns the exclusive licensing rights to sales of the Optimized Fuel Maximizer; per the Royalty agreement dated August 27, 2018 the Company agreed to the acceptance of royalty revenue generated by sales which are made on a manufacturer direct basis.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
For the Company's fiscal years ended June 30, 2018 and 2017, we were billed approximately $1,500 in 2018 and $12,023 in 2017 by Pritchett, Siler & Hardy, P. C. and for the Company's fiscal years ended June 30, 2018, we were billed approximately $8,023 by Haynie & Company and nothing in 2017 for professional services rendered for the audit and reviews of our financial statements.
Audit Related Fees
For the Company's fiscal years ended June 30, 2018 and 2017, we were not billed for professional services related to our audits, other than the fees discussed in Audit Fees above.
Tax Fees
For the Company's fiscal years ended June 30, 2018 and 2017, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning by our auditors.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended June 30, 2018 and 2017.
ITEM 15.
ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K.
The following documents are filed as part of this report:
Financial Statements and Financial Statement Schedules
The financial statements are included in Item 8 of this Form 10-K.
Exhibits Required by Item 601 of Regulation S-K
# Filed herewith.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
SIGNATURE
TITLE
DATE
/s/ Peter Sollenne
Director, CEO, CFO (Principal Executive, Financial and Accounting Officer)
October 12, 2018
Peter Sollenne